
Gass Ll-A 

Book. 

Copyrights C0 I7 



COPYRIGHT DEPOSIT. 



Operative Ownership 



A SYSTEM OF INDUSTRIAL PRODUCTION 
BASED UPON SOCIAL JUSTICE AND THE 
RIGHTS OP PRIVATE PROPERTY. 



DESIGNED TO ENFORCE A JUST DIVISION BETWEEN 
CAPITAL AND LABOR OF THE WEALTH WHICH 
THEY JOINTLY PRODUCE, ENABLING INDUS- 
TRIAL TOOL-USERS TO BECOME, IN WHOLE OR 
IN PART, TOOL-OWNERS, THEREBY EFFECT- 
ING A MORE GENERAL DIFFUSION OF 
WEALTH AMONG THE PEOPLE, INSPIR- 
ING A MORE GENERAL REGARD FOR 
THE RIGHTS OF PRIVATE PROPERTY, 
AND, BY A REAL UNION OF CAPITAL 
AND LABOR, PROVIDING A SAFE- 
GUARD TO PRIVATE INDUSTRY 
AGAINST EXCESSIVE GOVERN- 
MENTAL REGULATION. 



BY 

JAMES J. FINN 



CHICAGO 

LANGDON AND COMPANY, 

PUBLISHERS 

I '* I O 

■ 






"The form of association which, if mankind 
continues to improve, must be expected in the 
end to predominate, is not that which can exist 
between a capitalist as chief and work people 
without a voice in the management, but the as- 
sociation of laborers themselves, on terms of 
equality, collectively owning the capital with 
which they carry on their operations, and work- 
ing under managers elected and removable by 
themselves J 9 

JOHN STUART MILL. 

"Ultimately we desire to use the government 
to aid as far as can safely be done, the indus- 
trial tool users to become, in part, tool own- 
ers" 

THEODORE ROOSEVELT. 



BEri5f9I6 

COPYRIGHT 1916, BY 
LANGDON AND COMPANY. 

©CI.A453U99 



t 



PREFACE. 

In the following chapters I have attempt- 
ed to show the need of some system of in- 
dustrial production whereby the strife and 
unrest which characterize industrial rela- 
tions today may be avoided, the industrial 
freedom of the laboring classes achieved, 
and the rights of property restored and se- 
cured, which of late years, have been grow- 
ing progressively insecure as the result of 
the increasing hostility of the numerically 
predominant propertyless element of the la- 
boring classes, also to outline and, in a ten- 
tative way, to work out, such a system, as 
well as to suggest a plan whereby the gen- 
eral adoption of the system may be brought 
about. 

The system proposed is to be achieved 
through three successive stages of develop- 
ment, as follows: first, joint operation of 
industrial establishments, with joint par- 



PREFACE. 

ticipation in profits, by capitalists and op- 
eratives ; second, joint ownership gradually 
superadded to joint operation; and, final- 
ly, complete ownership by the opera- 
tives collectively, in each establishment, of 
the capital, in the forms of machinery, ma- 
terials, etc., with which they carry on their 
operations. 

I make no pretense to the discovery of 
any new principle of the science of econom- 
ics. The system which I have advocated, 
as well as the plan suggested for bringing 
it about, involves merely the application of 
old principles to new conditions. The prin- 
ciple of the ownership of the tools of indus- 
try by the individual tool-user is older than 
civilization; and the system of collective 
ownership advocated in this book is merely 
an adaptation of that principle to modern 
industrial conditions. A system of indus- 
trial production embodying the principle 
of collective ownership by the workers was 
predicted by John Stuart Mill sixty years 
ago, as the form of industrial association 
which must ultimately predominate. That 
principle has been advocated by many lead- 
ing economists and publicists of the pres- 
ent day, and is in practical operation today 
in numerous establishments in Europe and 
America. 



PREFACE. 

So it is also in regard to the plan pro- 
posed for the general introduction of the 
system of collective operative ownership. 
Its leading features — eminent domain, the 
use of government credit, joint operation, 
and joint ownership of industry by capital- 
ists and operatives — have been applied be- 
fore in a variety of ways. What I have 
done in the following chapters is merely to 
assemble/ ideas and principles evolved in 
the course of the social and industrial de- 
velopment of society, and to arrange them 
in harmonious relation, in the plan above 
mentioned. 

Arrangements between capital and labor, 
for participation in profits and for joint 
ownership, have heretofore been made only 
as acts of grace by benevolently disposed 
capitalists, and in exceptional cases; and it 
is the purpose of the scheme proposed in 
this book to provide a way by which the 
like benefits may hereafter be secured to 
operatives of industrial establishments gen- 
erally, as matters of social justice and le- 
gal right, but without violating in the 
slightest degree the personal or property 
rights of the capitalist. | 

While the question of the rights of pri- 
vate property and private industry enter 
into the discussion of the subject of Oper- 



PREFACE. 

ative Ownership as incidental to the main 
purpose of the book as above outlined, they 
are nevertheless scarcely less important, re- 
gard being had to the interests of society 
at large, than are the rights of labor. In- 
deed the rights of labor, in the sense con- 
tended for in this book, would be of compar- 
atively little value if the industries in which 
labor applies itself to the production of 
wealth were to be continually subjected to 
the nagging and annoying interference of 
governmental regulative agencies or com- 
missions at every turn; or if the wealth 
which labor produced, into whosesoever 
hands it might lawfully pass, were liable 
to be taken, or its value impaired or de- 
stroyed, by the arbitrary and unreasonable 
exercise of the taxing or the police power 
of the State. 

The system described in the following 
pages is the more beneficial, therefore, be- 
cause not only does it secure to the laborer, 
even in its earliest stage, a just share of the 
wealth which he produces, but by the direct 
and substantial interest which it will give 
him in the use of the capital invested, and, 
in the later stages of the system, by the 
ownership, in whole or in part, of that cap- 
ital, it will make it to the interest of the 
laboring class to so exert its influence 



PREFACE. 

through the ballot as to protect the rights 
of private property and private industry 
against encroachments upon those rights 
by the government, by which means they 
now are often seriously impaired, while 
other and more serious encroachments are 
threatened. 

I am profoundly conscious that the pres- 
ent volume, in its treatment of the subjects 
with which it deals, is full of imperfections ; 
and many relevant questions in relation to 
the scheme proposed will occur to the read- 
er to which no answer will be found in this 
book. In extenuation of its short-comings 
in this regard, it must be borne in mind 
that the book is not submitted as a complete 
elaboration of a fully developed system, but 
rather as presenting in a tentative way a 
system which in many important features 
must be developed, not by a single mind, 
but by many, through the free expression 
and interchange of ideas, and in some re- 
spects also by experience. Intending to take 
part in the further development of the sys- 
tem, I shall welcome an interchange of 
views in regard to it with any person who 
may be interested in the subject and quali- 
fied by education or experience to partici- 
pate in such development. 

September, 1916. 



CONTENTS 

Chapter I 

THE CLASS STRUGGLE 

Page 

The Social Unrest 7 

Wage-Capitalism 11 

The Rise of Wage-Capitalism in England 13 

Wage-Capitalism in America 17 

Scantiness of Wages 20 

A Decent Living Wage 22 

Elements of a Living Wage 25 

False Philanthropy. .> 28 

Extreme Poverty of the Working Classes 30 

Appalling Infant Mortality u . . 33 

Uncertainty of Employment 34 

The Workers Organize 36 

Strikes and their Cost 39 

Exorbitant Toll of Capitalism 42 

A Remedy or Socialism 44 

Chapter II 

PROPOSED REMEDIES FOR INDUSTRIAL ILLS 

Page 

Socialism — Co-operation — Trade Unionism 46 

Socialism 47 

Socialism and Individualism 49 

Present Aim of Socialism 52 

Trend Towards Socialism * 54 

The Government in Business 57 

Is Socialism Declining? 62 

Socialism a Real Menace 64 

Co-operation 66 

Profit Sharing and Labor Co-partnership 68 

The Maison Leclaire 70 

The Familistere Society of Guise 73 

Slow Progress of Co-operation 77 

What Co-operation Lacks 78 

Trade Unionism 80 

Trade Agreements 82 

The True Goal of Trade Unionism. 85 



CONTENTS 

Chapter III 

OPERATIVE OWNERSHIP 

Page 

The Term Defined 91 

Fundamental Error of the Capitalist Theory 94 

Mutual Needs of Capital and Labor 97 

Strife Between Capital and Labor 99 

How Class Warfare May Be Ended 101 

Pre-Capitalist Industries 104 

Adaptation of the Principle of Workers' Ownership of 

Tools to Modern Conditions 107 

Distinguished Advocates of the Principle 109 

Obstacles to its Adoption 110 

Government Aid 114 

Manner of Its Use 115 

Transition from Capitalism to Operative Ownership.. 118 
Joint Ownership Distinguished from Profit-sharing. . . 123 

Chapter IV 

WAYS AND MEANS 

Page 

Rights of Property Sacred 129 

Views of Society Changing 131 

Obstacles to Operative Ownership. 132 

Example of Benevolent Capitalists 133 

Eminent Domain 137 

Eminent Domain an Option of Purchase 139 

Eminent Domain and Government Credit 141 

Examples of Government Aid 146 

Ireland Before the Land Purchase Acts and After.... 148 

Land Capitalism and Industrial Capitalism 150 

Government Aid in the United States 151 

Example of Indemnity to Government in Guaranty of 

Bank Deposits 155 

Safety Through Indemnity Fund 157 

Little Risk and Great Benefits 160 

Consider the Workingman 161 

Government Credit to be Seldom Used 164 

An Equitable Basis of Division. 167 

Introducing the System 175 

Conserving the Public Interests 177 

A Joint Operative Board 179 

Operatives as Joint Owners 181 

Operatives as Sole Owners 182 

Legislation not Indispensable 183 



CONTENTS 

Chapter V. 

BENEFITS OF OPERATIVE OWNERSHIP 

Page 

All Classes of Society Benefited 186 

Benefits to the Employer 187 

A Safeguard Against Governmental Interference 189 

Benefits to Operatives 194 

Great Increase of Labor Efficiency 195 

Increased Efficiency Under Profit-Sharing 198 

Fallacious Notions About Increase of Output 200 

Most for Least and Least for Most 201 

Scientific Management 202 

Cheapening of Products 205 

Unemployment Problem Solved 208 

Benefits to the State 210 

Benefits to Society , 213 

Chapter VI 

DISAPPEARING RIGHTS OF PROPERTY 

Page 
Conservative Tendency of Operative Ownership 218 

The Rights of Private Property 220 

Governmental Greed of Power 222 

Forms of Governmental Encroachment on Rights of 

Private Property 225 

Taxation , 226 

Income Taxes 230 

Inheritance Taxes 232 

Progressive Taxation 234 

Government Regulation of Industry 238 

Federal Regulation i 239 

Enlargement of Governmental Powers by Judicial 

Construction 241 

The Sherman Anti-Trust Act 242 

Venerable Traditions Violated 245 

Regulation Running Riot , 246 

Chapter VII 

DISAPPEARING RIGHTS OF PROPERTY— (Continued) 

Page 

The Police Power 248 

Menace of the Police Power 249 



CONTENTS 

Page 

A Creature of the Courts 250 

Police Power versus Constitutional Guaranties 251 

Conflicting Decisions 254 

Charges of Judicial Bias 256 

No Bias Against Progressive Legislation 257 

Courts Influenced by Public Opinion 258 

How the Police Power Operates 261 

The Grange Movement 263 

A Momentous Decision 2S6 

Ruinous Railway Regulation 268 

True Basis of Governmental Right of Regulation 269 

Retrospective 273 

The Cause of, and the Remedy for, Existing Condi- 
tions , 276 



Chapter VIII 

CONCLUSION 

Page 

Advantages Summarized 279 

Paternalism Carried to Excess 282 

Propertyless Class Beneficiaries of Public Extravagance 285 

The Wealthy Class the Prey of Demagogues 286 

Undue Interference Impossible Under Operative Owner- 
ship 289 

Lack of Voting Power the Real Crime of Big Business 290 

Equality of Rights Contingent upon Voting Power 291 

Wealth Secure Under Operative Ownership 292 

Conclusion , , , . , f ,*,,,,.,,,*.,,,.,,,,,.,,,«*?**« 293 



CHAPTER I. 

WAGE-CAPITALISM AND THE CLASS 
STRUGGLE. 

THE SOCIAL UNREST. 

We live in a time of unprecedented social 
unrest, the outcome of which no man can 
foresee, nor can any man predict with con- 
fidence. Many attempt such prediction, but 
in most cases they but reflect their own 
convictions as to what ought to be. Mani- 
festations of this condition of unrest are 
everywhere in evidence. In the daily press, 
in the current magazines, in the recent book 
literature of economics and related sub- 
jects, we constantly see references to the 
prevailing social unrest. The Congress of 
the United States has taken official notice 
of the existence of this condition, and cre- 
ated a Commission on Industrial Relations 
for the purpose of investigating the cause 
and suggesting a remedy. 

Social disturbances, sometimes of a more 
violent character than have, as yet, devel- 
oped in the present situation, and often 
partaking of a political nature, have oc- 



8 OPERATIVE OWNERSHIP 

curred in the past, now in one country and 
now in another; but never before has so- 
ciety been agitated, at once so profoundly 
and so universally, by a spirit of unrest, 
purely economic in its nature and origin, 
as at present. Everywhere students of 
sociology, men learned in the science and 
the history of social development, and fa- 
miliar with the conditions which in the past 
have preceded great and violent changes 
in the social order, realize, and many have 
given utterance to the conviction, that 
events fraught with momentous conse- 
quences are impending, and that, if the ex- 
isting social order is to be perpetuated, the 
conditions of wealth production must be so 
modified as to produce a greater measure 
of justice in the apportionment of the 
product, as between capital and labor, than 
obtains at the present time. 

Inquiry as to the cause of the present 
condition of social affairs elicits a number 
of answers as variant as the classes rep- 
resented by the persons to whom the in- 
quiry is addressed. Thus the capitalist will 
give one reason, the representative of labor 
another, the socialist a third, the legislator 
a fourth, and so on; each reflecting the 
views more or less prevalent among the 
class which he represents, and affected, in 



THE CLASS STRUGGLE 9 

greater or lesser measure, by the interests 
or the environment of that class. 

However widely variant the answers 
may be in other respects, it will be observed 
that they all possess one feature in com- 
mon, namely: that they refer the trouble 
proximately or remotely, to the institution 
of capitalism. Thus one will ascribe as 
the cause the selfishness and greed of the 
employer of labor, as manifested in his re- 
lations with his employees. Another will 
give as the cause the improvidence and un- 
thriftiness of the laboring classes, which 
prevent them from living upon, and being 
content with, the ample wages, as such per- 
sons contend, which the laborer receives 
from his capitalist employer. A third will 
place the blame upon both the employer 
and employee for their lack of mutual co- 
operation for the promotion of their com- 
mon interests, and their efforts to over- 
reach one another, one by exacting the 
greatest possible amount of work for the 
least money, and the other by giving the 
least work for the most money. And a 
fourth will, perhaps, find the cause in the 
too rapid development, or the too general 
use, of machinery by which the capitalist 
seeks to multiply the productive power of 
labor, thereby throwing some of those em- 



10 OPERATIVE OWNERSHIP 

ployed out of work. But at the core of 
every answer will be found some feature 
or some idea which associates the trouble 
unerringly with the institution of capital- 
ism. 

The careful observer of, or the serious 
inquirer into, the prevailing industrial con- 
ditions, whatever his interest or his envir- 
onment may be, cannot fail to perceive a 
causative relation between capitalism and 
the various social phenomena the sum of 
which is expressed in the term "social un- 
rest/' To such persons the conclusion will 
be irresistible that if the prevailing con- 
dition of social unrest is to be remedied; 
if the social and political catastrophe which 
very many well informed, thoughtful and 
conservative persons can discern as the ev- 
ident climax of this unrest, is to be averted, 
it must be done by either a radical refor- 
mation, or the total abolition, of capitalism 
in at least one of its most familiar phases. 

In order to arrive at a proper under- 
standing of the conditions before men- 
tioned, of the imperative need of a remedy 
for those conditions, and of the merits of 
the remedy, which it is my intention to 
suggest, and to some extent, elaborate, in 
this volume, a brief survey of that phase 
of capitalism which has to do with the 



THE CLASS STRUGGLE 11 

employment of labor for wages, of its rise 
and development, of its effects upon society 
in general, and upon the laboring classes 
in particular, would seem to be indispens- 
able. 

WAGE-CAPITALISM. 

In the broadest and most widely recog- 
nized sense of the term, capitalism stands 
for all the activities, social and political, 
of capitalists, whereby accumulated or con- 
centrated wealth is employed for the pro- 
duction of new; wealth, or by which the 
productiveness of capital is increased. In 
a narrower sense, and that in which the 
term is very generally used by advocates 
of the cause of labor in what is often called 
"the class struggle," it means the economic 
system whereby capital, in the form of 
land, machinery, raw materials or money, 
is owned, but not used, by one class of per- 
sons called capitalists, and used, but not 
owned, by another class, called workers, 
operatives, or some other name of like im- 
port, who use it in the production of new 
wealth; receiving for their labor a fixed 
or ascertainable wage, without any voice 
in the management of the establishment 
in which they are employed, nor any share 
in the wealth which they produce, beyond 



12 OPERATIVE OWNERSHIP 

the agreed remuneration, which remunera- 
tion is fixed without any definite relation to 
the value of the product of such labor, and 
which product becomes the sole property 
of the capitalist. 

It is with capitalism in this latter sense, 
which in reality is but one phase of that 
institution, that we shall be chiefly, though 
not exclusively, concerned in the following 
chapters; and to distinguish this sense of 
the term, the leading characteristic of 
which is the labor-wage feature, from the 
broader sense of the term as above defined, 
as well as from the wage system in gen- 
eral (of which system also the relations 
between capital and labor above mentioned 
present but a single phase), I shall here- 
after refer to capitalism in the narrower 
sense above mentioned as Wage-Capitalism. 

The quintessence of wage-capitalism is 
the relation of master and servant, a re- 
lation which involves power and dominion 
on the one side, and dependence and ser- 
vility on the other. It is this which enables 
the capitalist to appropriate the whole 
product of the laborers' toil, over and above 
the meager subsistence which the laborer 
must receive if he is to live and reproduce 
his kind, so that the supply of labor at the 
service of the capitalist may be constant. 



THE CLASS STRUGGLE 13 

It is this, and the very meagerness of his 
wage, which holds the laborer in a condi- 
tion which in a certain sense may be con- 
sidered one of bondage to the capitalist. 
For though the laborer may sometimes ex- 
ercise a certain liberty of choice as to 
where, or at what occupation, he will work, 
it is such a form of liberty as the illustrious 
philosopher and sociologist, Herbert Spen- 
cer, had in mind when he wrote: "This 
liberty amounts in practice to little more 
than the ability to exchange one slavery for 
another, since, fit only for his particular 
occupation, he has rarely an opportunity 
of doing anything more than decide in 
what mill he will pass the greater part of 
his dreary days."* 

THE RISE OF WAGE-CAPITALISM IN ENGLAND. 

Wage-capitalism came into existence in 
England during the last half of the 
eighteenth century as the result of condi- 
tions having their origin in the invention 
of the steam engine, the spinning jenny, 
the power loom, and such like labor-saving 
inventions of that period. Where formerly 
the industrial products required to supply 
the wants of society were supplied by ar- 

*Principles of Sociology, by Herbert Spencer, Sec. 820. 



14 OPERATIVE OWNERSHIP 

tisans working with simple tools, in house- 
hold shops, the new machinery, multiplying 
the productive power of each worker many 
times, was grouped together in spacious 
shops or factories, and operated by the 
power of a single steam engine, making 
competition by hand workers impractica- 
ble, so that the latter were gradually forced 
to abandon their domestic industries and 
seek employment in the factories. 

The high cost of the new machines, 
grouped as the purposes of economy re- 
quired them to be, made it impossible for 
the workers, even collectively, to procure 
the required capital to own them ; and so it 
was supplied, for the most part, by a class 
of persons who had previously amassed 
moderate fortunes by trading in the prod- 
ucts of the domestic industries which the 
new factory system was superseding. 

The greatly increased productive power 
of the new system was such that, even with 
the reduced prices obtained for the manu- 
factured products, the supply was always 
greater than the demand. Also the reduced 
number of operatives required to supply 
the demand by means of the new processes, 
left many persons unemployed. More- 
over, many of the new machines were 
operated by women and children which 



THE CLASS STRUGGLE 15 

lessened still further the number of 
former tradesmen of the domestic indus- 
tries for whom there was employment 
in the factories. The glut of the labor 
market thus produced was something un- 
heard of, and factory owners did not 
scruple to take advantage of it to impose 
upon their unfortunate employees the most 
severe conditions that could be endured, 
while paying the lowest wages at which 
subsistence, with little regard to decency, 
could be maintained. The hours of labor 
were usually fourteen, and in many cases 
sixteen, per day, and children from six years 
of age up, as well as women, without regard 
to age or condition, were required to work 
in this way. The conditions of contact be- 
tween the sexes in the factories were such 
as to promote licentiousness within and 
without the factory. Drunkenness and im- 
morality in both sexes were of common oc- 
currence. The domestic ties and the duties 
arising therefrom between husband and 
wife and between parent and child, were 
lightly regarded. Even human slavery, 
disguised as apprenticeship, was practiced. 
It took the form of "binding out" by poor- 
law guardians to factory owners, of chil- 
dren from the poor houses, ostensibly as 
apprentices. These were herded together 



16 OPERATIVE OWNERSHIP 

when not at work, in crowded and unwhole- 
some sleeping rooms, without regard to 
sex, insufficiently fed, poorly clad, and, if 
disobedient or refractory, were cruelly 
beaten, so that many died from ill treat- 
ment. 

A parlimentary report for the year 1833 
contains the following: "We hear of chil- 
dren and young people in the factories 
overworked and beaten as if they were 
slaves; of diseases and distortions only 
found in the manufacturing districts; of 
filthy, wretched homes where people huddle 
together like beasts; we hear of women 
and girls working underground in the dark 
recesses of the coal mines, dragging loads 
of coal in places where horses could not 
go, and harnessed and crawling along the 
subterranean pathways like beasts of bur- 
den. Everywhere we find cruelty and op- 
pression, and in many cases the workmen 
were but slaves, bound to fulfill their mas- 
ters' commands under fear of dismissal and 
starvation."* 

Such, in part, is the story of wage-cap- 
italism as exemplified in the English fac- 
tory system and in the mining industry 
during the first third of the last century. 



♦Quoted by Charles Beard in The Industrial Revolution, 
London, 1901. 



THE CLASS STRUGGLE 17 

It seems incredible that such conditions 
could exist in a civilized and a Christian 
land; but the brief description here given 
falls far short of the horrible reality as 
related by the writers of that period. Any- 
one who wishes to learn more of the hor- 
rors of factory labor of which but a faint 
idea can be formed from what has been 
said in the foregoing pages, is referred to 
the work of P. Gaskell entitled "The Manu- 
facturing Population of England, its moral, 
social and physical condition, and the changes 
which have arisen from the use of steam ma- 
chinery" (London, 1833). Any one who 
reads Mr. Gaskell's work will realize 
that, without exaggeration, it may be 
said that the condition of the English fac- 
tory operative in the early days of wage- 
capitalism was vastly worse, in regard to 
food, clothing, housing and morals, than 
that of the serfs of the middle ages, or of 
the negro slaves of the Southern United 
States before the war of the rebellion. 

WAGE-CAPITALISM IN AMERICA. 

In America wage-capitalism did not so 
early find a foot-hold, nor have the condi- 
tions which existed in the factory districts 
of England ever found a parallel in this 
country. The conditions of the working 



18 OPERATIVE OWNERSHIP 

class in the early days of wage-capitalism 
in this country were bad enough, however, 
and, as to hours and general conditions of 
labor, differed only in degree from the con- 
ditions which existed in England, and not 
so greatly in that regard as one might ex- 
pect in a newly settled country, "In both 
countries the cradle and the home were 
robbed to secure victims for the natal sac- 
rifice of new-born capitalism. 95 * About the 
year 1316 there was estimated to have been 
100,000 persons employed in the manufac- 
ture of cloth in the United States, of whom 
about 10 per cent, were men, 66 per cent 
women and female children, and 23 per 
cent. boys. The hours of work were twelve 
to fourteen per day, and the wages ranged 
from $11.50 per week for a comparatively 
small number to an average of $1.50 per 
week or less, for female children. The tex- 
tile mills in New England generally ran 
thirteen hours a day the year round, and 
one in Connecticut ran over fifteen hours. 
Professor Ely, the learned American 
writer on economics, declares that women 
and children had to be at work at half past 



^Social Forces in American History, page 172, by A. M. 
Simons. 



THE CLASS STRUGGLE 19 

four in the morning, and sometimes were 
urged on by the use of the cowhide.* 

The rapid development of railway con- 
struction, which began about the year 1830, 
following the invention of the locomotive, 
the invention of the hot blast. process in the 
iron industry, the use of anthracite coal in 
the smelting of iron, and the general use 
of coal for steam purposes, which resulted 
from the rapid increase in the number of 
steam power industries, all combined to 
open a field for capital in the manufactur- 
ing, mining and transportation industries, 
unparalleled in the history of the world. 
Compared to the industrial transformation 
thus produced the industrial changes inci- 
dent to the introduction of steam power 
and the factory system before mentioned, 
which has been called the Industrial Rev- 
olution, were of trivial importance, as 
measured by the amount of capital in- 
volved, the number of persons employed, 
and the results, as affecting the industrial 
and commercial future of society. In every 
stage of its development, however, and in 
every department of industry into which it 
has entered, the activities of capitalism 
have been characterized by the same faults, 



^Evolution of Industrial Society, by Richard T. Ely, page 
59. 



20 OPERATIVE OWNERSHIP 

which it has manifested in greater or lesser 
measure according to the degree of free- 
dom with which it has been permitted to 
pursue its own methods in its dealings with 
the laboring classes, the agencies of gov- 
ernment, and the general public. 

The most pernicious of the faults of cap- 
italism, regarded from the viewpoint of 
their effects upon the general well-being of 
society, is the manner in which, when left 
to themselves, capitalists in general — 
though with some admirable exceptions — 
dealt with their employees. In their inordi- 
nate greed of gain they have, speaking 
generally, regarded neither the lives, the 
health nor the moral, physical or social 
well-being of their employees. Until for- 
bidden to do so by law or restrained by the 
power of organized labor, capitalist em- 
ployers required their employees to work 
under unsanitary conditions, and neglected 
in many cases to provide suitable safety 
appliances to protect them from danger of 
accidents by exposed or otherwise danger- 
ous conditions of machinery or places for 
work. 

SCANTINESS OF WAGES. 

In the matter of wages the smallest 
amount which the worker could be induced 
or forced to accept has generally been the 



THE CLASS STRUGGLE 21 

measure of his remuneration. Until, by the 
power of organization, the laborer was en- 
abled to wrest from his employer some- 
thing more than enough to supply the bare 
necessities of life, that, and scarcely that, 
was all he received. Even with the power 
of organized labor behind him the average 
wage earner today receives less than a de- 
cent living wage. In consequence of this 
condition the working classes of today are 
compelled to submit to a low standard of 
living in the midst of comforts and lux- 
uries, the products of their labors, which 
may be seen on every hand, for the enjoy- 
ment of the middle and upper classes — as 
rated by financial standards — but in which 
comforts and luxuries the classes which 
produce them are rarely or never permitted 
to share. 

But scant as are his wages at best, and 
meager as is the subsistence which they 
afford, the earnings of the average wage- 
worker are still further reduced by unem- 
ployment. Without tools in the form of ma- 
chinery, the worker in modern industrial 
operations can do nothing. But the tools 
belong to the capitalist, who will not allow 
them to be used unless he can realize a 
profit on the worker's labor in addition to 
a fair interest on his own capital. Disre- 



22 OPERATIVE OWNERSHIP 

garding the economic law that cheapness 
of a given commodity tends to create a de- 
mand for it, the average capitalist would 
close his establishment when business is 
slack, and wait for the demand to come 
from scarcity of supply (though the oper- 
atives starve in the meantime), rather than 
forego his profits or lower his interest. 

Industrial production goes on increasing 
from year to year, under the capitalistic 
regime, piling up for the few, colossal for- 
tunes wrought out of the blood and sweat 
and bone and muscle of the many, while the 
average wage-worker lives from hand to 
mouth, no better off at the end of the year 
than he was at the beginning, but one year 
nearer to the inevitable time when, no 
longer able to do a man's work, he will be 
rejected — "scrapped," like a worn out ma- 
chine — and doomed to drag out the remain- 
der of his miserable life as a dependent 
upon the filial duty of his children, or upon 
the charity of some more distant relative, 
or the still colder "charity" of the poor- 
house. 

A DECENT LIVING WAGE. 

I said, in a preceding paragraph, that the 
average wage worker of today receives less 
than a decent living wage, and as a result 
is compelled to submit to a low standard 



THE CLASS STRUGGLE 23 

of living as compared to the manner of liv- 
ing affected by persons of higher rank in 
a financial sense. I realize that standards 
of living are relative matters, and vary 
with the time, the place and the state of 
civilization that is in mind. It is to be un- 
derstood that reference is here made to 
present day standards of civilization in 
America. The accuracy of the statement 
further depends upon what constitutes a 
living wage, for as to that there is room 
for a wide diversity of opinion. It is im- 
portant, therefore, for the sake of clearness 
that some space be given, in this connec- 
tion, to a discussion of the question: What 
constitutes a living wage and a proper 
standard of living for the American work- 
ingman? 

Mr. John Mitchell, formerly president of 
the United Mine Workers of America, in 
his book, Organized Labor* says: "The 
American standard of living of the year 
1903 is a different, a better, and a higher 
standard than the American standard of 
living of the year 1803. The American 
workman of the present day is a better 
workman, more intelligent, more industri- 
ous, more efficient than his forefathers of 
a hundred years ago. . . . While the 



♦Pages 115-119. 



24 OPERATIVE OWNERSHIP 

standard of living has risen, it has not by 
any means kept pace with the increased 
productivity of labor." The workman of 
today is therefore, relatively to his pro- 
ductive power, worse off than was his pro- 
totype of a century ago. 

Speaking of the standard of living that 
should obtain among the laboring classes 
in America, Mr. Mitchell says: "In cities 
of from five thousand to one hundred thou- 
sand inhabitants the American standard of 
living should mean, to the ordinary un- 
skilled workman with an average family, a 
comfortable house of at least six rooms. 
It should mean a bathroom, good sanitary 
plumbing, a parlor, dining-room, kitchen 
and sufficient sleeping room that decency 
may be preserved and a reasonable degree 
of comfort maintained. The American 
standard of living should mean to the un- 
skilled workman, carpets, pictures, books, 
and furniture with which to make home 
bright, comfortable and attractive for him- 
self and family, an ample supply of cloth- 
ing, suitable for winter and summer, and 
above all a sufficient quantity of good, 
wholesome, nourishing food at all times of 
the year. The American standard of living, 
moreover, should mean, to the unskilled 
workman, that his children should be kept 



THE CLASS STRUGGLE 25 

in school until they have attained the age 
of sixteen at least, and that he be enabled 
to lay by sufficient to maintain himself and 
his family in times of illness, or at the close 
of his industrial life, when age and weak- 
ness render further work impossible, and 
to make provision for his family against 
his premature death from accident or oth- 
erwise." The rate of wages at which this 
standard could be maintained was esti- 
mated by Mr. Mitchell to be not less than 
$600 per year in communities between the 
limits of population above mentioned. In 
view of the great advance in the cost of 
living since Mr. Mitchell's book was writ- 
ten (1903) it is doubtful if this standard 
could be maintained now on $800 a year. 

ELEMENTS OF A LIVING WAGE. 

Dr. John A. Ryan, in his excellent work, 
'A Living Wage, reviews the descriptions 
and definitions of a number of economists 
as to what constitutes a living wage, among 
which there is none that is at once more 
terse, more complete and more accurate 
than that of President Gompers of the 
American Federation of Labor. He de- 
fines a living wage as "A wage, which, 
when expended in the most economical 
manner shall be sufficient to maintain an 



26 OPERATIVE OWNERSHIP 

average sized family in a manner consist- 
ent with whatever the contemporary local 
civilization recognizes as indispensable to 
physical and mental health, or as required 
by the rational self-respect of human be- 
ings." Dr. Ryan discusses categorically 
the most essential requisites of a living 
wage, and concludes that food, clothing, 
shelter, mental and physical culture, life 
and accident insurance — all in a reasonable 
degree — are essential elements of a de- 
cent livelihood. Remuneration inadequate 
to secure all of these things to the laborer 
and his family, falls below the require- 
ments of a living wage. 

Professor Albion W. Small, while at the 
head of the Department of Sociology of the 
University of Chicago, declared, as quoted 
by Dr. Ryan,* that: "No man can live, 
bring up a family and enjoy the ordinary 
human happiness on a wage of less than a 
thousand dollars a year." 

Dr. Ryan after an exhaustive discussion 
©f the elements that enter into a living 
wage, expressed in terms of money, and 
without distinction between skilled and un- 
skilled labor, gives his own conclusions, 
with characteristic conservatism, as to 
what constitutes a living wage, to the effect 



*A Living Wage, by John A. Ryan, page 136. 



THE CLASS STRUGGLE 27 

that in any of the cities of the United 
States anything less than $600 per year is 
not a Living Wage; that this sum is prob- 
ably a Living Y/age in those cities of the 
Southern states in which the principal 
necessaries of life are cheaper than in the 
North; that it is possibly a living wage in 
cities of moderate size in the West, North 
and East; and that in some of the largest 
cities of the last named sections it certainly 
is not a living wage. In the ten years since 
Dr. Ryan's book was published (1906) the 
cost of living has increased, at a low esti- 
mate, twenty-five per cent, so that the same 
standard of living which Dr. Ryan then 
estimated to cost $600 a year can not now 
be maintained under $750. 

Having described the content of a living 
wage and defined it in terms of money, in 
a manner which, if it be open to criticism, 
it must be on the grounds of excessive con- 
servatism, Dr. Ryan proceeds to estimate 
the proportion of wage earners in several 
industries who fail to receive a living wage. 
He shows by computation based upon a spe- 
cial report of the twelfth census (1900) on 
Employees and Wages, comprising thirty- 
four "stable and normal industries" classi- 
fied under the general heads of textile, 
wood-working, metal-working and miscel- 



28 OPERATIVE OWNERSHIP 

laneous, that sixty-six per cent, of the 
adult males received less than a living 
wage. He further shows, by a similar com- 
putation based upon the figures given in 
the sixteenth annual report of the Inter- 
state Commerce Commission, relating to 
the 1,302,494 railway employes — exclusive 
of officers — that seventy-two per cent, of 
the adult males failed to receive a living 
wage. 

FALSE PHILANTHROPY. 

When so large a proportion of the labor- 
ing classes of the United States are com- 
pelled to subsist upon a wage which falls 
below the requirements of a decent liveli- 
hood, while millionaires multiply and man- 
ufacturers amass enormous fortunes by the 
profits of unrequited labor, and flaunt their 
wealth with unseemly prodigality in the 
faces of the oft-times hungry and ragged 
workers whose hands created it, or pose as 
philanthropists, while building to them- 
selves monuments in the form of library 
buildings, colleges, universities and philan- 
thropic foundations, endowed with such 
wealth as to make the fabled riches of 
Croesus seem insignificant by comparison, 
with never a thought of the workers whose 
sweat and blood and muscle they have trans- 
muted into gold by the alchemy of capital- 



THE CLASS STRUGGLE 29 

ism, it is little wonder that social unrest 
and discontent exist. 

When it is said that a very large per- 
centage of wage earners, as shown by Dr. 
Ryan, earn less than a living wage, it is 
not to be understood that the average of 
those whose wages fall below that line re- 
ceive anything near the sum which Dr. 
Ryan estimates as the minimum living 
wage. Professor Scott Nearing in his val- 
uable study of wage statistics entitled 
"Wages in the United States," shows that 
in that portion of the United States 
east of the Rocky Mountains and north 
of Mason and Dixon's line 75 per cent, 
of the adult male employees and 95 per 
cent, of the adult female employees re- 
ceive annually less than $600; that 50 per 
cent, of the adult males and 90 per cent, of 
the adult females receive annually less than 
$500; that 10 per cent, of the adult males 
and 35 per cent, of the adult females receive 
less than $325 annually; and that 20 per 
cent, of the adult females receive less than 
$200 per annum. 

It is chiefly the insufficiency of the la- 
borers' wage which lies at the bottom of 
the class struggle. If what is a matter of 
common knowledge can be any more firmly 
established as a fact by a citation of high 



30 OPERATIVE OWNERSHIP 

authority, we have the declaration of the 
Federal Commission on Industrial Rela- 
tions, speaking by its Chairman, Mr. Frank 
P. Walsh, in its report to Congress (Au- 
gust, 1915), to the effect that low wages is 
the basic cause of the prevailing unrest and 
discontent among the working classes. 

"We find the basic cause of industrial dis- 
satisfaction to be low wages," writes Mr. 
Walsh, in the report above mentioned, and 
he adds: "We further find that unrest 
among the workers in industry has grown 
to proportions that already menace the so- 
cial good will and the peace of the nation." 

EXTREME POVERTY OF THE WORKING CLASSES. 

The limits of this chapter forbid a more 
exhaustive treatment of this branch of my 
subject, but I would refer any one who 
would learn more of the real depths in 
which a large number of the laboring 
classes lives under the regime of capitalism 
to read some of the works which treat of 
the condition of the laboring classes, 
among which I would particularly mention 
Poverty, by Robert Hunter, and How the 
Other Half Lives, by Jacob Riis. 

A perusal of these works will disclose 
such conditions of wretchedness and misery 
in the lower stratum of the laboring classes 



THE CLASS STRUGGLE 31 

in the large cities of America, that the 
crowded, reeking, noisome tenements de- 
scribed by Gaskell in his work above re- 
ferred to, and the ill-clad, ill-fed, ill-paid, 
despairing wretches who inhabited them 
and which were the ordinary products of 
wage-capitalism during its earlier years in 
England, will seem to have their counter- 
parts in the United States today in the 
stratum above mentioned. 

It is not to be denied that the condition 
of the average wage earner today is vastly 
improved as compared to the average fac- 
tory operative of three-fourths of a century 
ago, or that could the factory workers of 
that time have been permitted to work at 
the rate of wages and under the conditions 
of labor which obtain today for the same 
class of labor, they would have thought 
themselves a happy lot of people. But the 
workers of today are an educated, intelli- 
gent, class-conscious and self-assertive 
class, with a higher and juster conception 
of their rights, as workers and as human 
beings. The change in the social condition 
of the working class within the period men- 
tioned is not so great as the change in the 
intellectual status of the average individual 
of that class and in his conception of the 
rights of his class, as the real producers of 



32 OPERATIVE OWNERSHIP 

the world's wealth. Nor has the increase 
in his wages within the period before men- 
tioned, kept pace with the increased pro- 
ductiveness of his labor; for with every im- 
provement in the processes of industrial 
production whereby the produce of labor 
has been increased in quantity or value, the 
lion's share of the increase has always been 
appropriated by the capitalist. 

"Now more than ever," writes Chairman 
Frank P. Walsh, of the Commission on In- 
dustrial Relations, "the profits of great in- 
dustries under centralized control pour into 
the coffers of stockholders and directors, 
who never have so much as visited the 
plants, and who perform no service in re- 
turn. And while vast inherited fortunes, 
representing zero in social service to the 
credit of their possessors, automatically 
treble and multiply in volume, two-thirds 
of those who toil from eight to twelve hours 
a day receive less than enough to support 
themselves and their families in decency 
and comfort. From childhood to the grave 
they dwell in the shadow of fear that their 
only resource — their opportunity to toil — 
will be taken from them through accident, 
illness, the caprice of a foreman or the for- 
tunes of industry. The lives of their babies 
are snuffed out by bad air in cheap lodg- 



THE tJLASS STRUGGLE 33 

ings, and the lack of nourishment and care 
which they cannot buy. Fathers and hus- 
bands die or are maimed in accidents, and 
their families receive a pittance, or succumb 
in mid-life, and they receive nothing."* 

APPALLING INFANT MORTALITY. 

Of the appalling rate at which the lives of 
babies are being snuffed out by the means 
mentioned by Chairman Walsh, some idea 
may be formed from the following para- 
graph taken from the report of Basil M. 
Manly, Director of Research and Investiga- 
tion of the above mentioned Commission : 

"It has been proved by studies here and 
abroad that there is a direct relation be- 
tween poverty and the death rate of babies ; 
but the frightful rate at which poverty kills 
was not known, at least for this country, 
until very recently, when, through a study 
made in Jamestown, Pa., by the Federal 
Children's Bureau, it was shown that the 
babies whose fathers earned less than $10 
per week die during the first year at the ap- 
palling rate of 256 per 1,000. On the other 
hand, those whose fathers earned $25 per 
week or more died at the rate of 84 per 1,- 
000. The babies of the poor died at three 

♦Supplementary statement of Chairman Frank P. Walsh 
appended to the Commission Report. 



34 OPERATIVE OWNERSHIP 

times the rate of those who were in fairly 
well-to-do families. The tremendous signifi- 
cance of these figures will be appreciated 
when it is known that one-third of all the 
adult workmen reported by the Immigra- 
tion Commission earned less than $10 per 
week, even exclusive of time lost. On the 
showing of Jamestown these workmen may 
expect one out of four of their babies to die 
during the first year of life."** 

UNCERTAINTY OF EMPLOYMENT. 

Next to the universal insufficiency of 
wages perhaps the most distressing of the 
evils attendant upon the wage system is that 
of the uncertainty of employment under it. 
Loss of employment may result, temporarily 
or permanently, from such a variety of 
causes — a season of business depression ; the 
change of the seasons; the disfavor of a 
foreman or superintendent; accident, sick- 
ness or advancing age; the introduction of 
new machinery, and many others, that al- 
most every wage earner in the manufactur- 
ing, mining, transportation, building, mer- 
cantile and many other branches of indus- 
try, lives in constant danger of it. 

This uncertainty is ever present to the 
mind of the wage-worker burdened with the 



**Report of Commission on Federal Relations, page 12. 



THE CLASS STRUGGLE 35 

ordinary responsibilities of life. It takes 
the cup of joy from the lips of love and re- 
places it with the gall and wormwood of 
doubt and fear. Sleeping and waking the 
wage-earner with a dependent family is 
ever haunted by the fear of want and suf- 
fering for those he loves, who are depend- 
ent upon him. To the wage-worker not so 
burdened, the holiest, tenderest and dearest 
relations of life — those of marriage and 
parenthood — are made to appear as things 
to be shunned and dreaded, and many are 
deterred by this uncertainty from realizing 
the highest purpose of human life ; for, as 
the poet Burns has truly said, 

"To make a happy fireside clime 

To weans and wife, 
That's the true pathos and sublime 
Of human life." 

Uncertainty of employment will never be 
eliminated so long as the question of em- 
ployment depends on the will of an employ- 
er rather than that of the worker; nor is 
any remedy possible for such uncertainty 
which does not place the means of employ- 
ment in the control of the workers. 



36 OPERATIVE OWNERSHIP 

THE WORKERS ORGANIZE. 

The natural result of the conditions de- 
scribed in the foregoing pages has been to 
increase the discontent of the average 
workingman with his lot, and to intensify 
the feeling of hostility with which he re- 
gards the system which operates to keep 
him forever in hopeless poverty while his 
exploiters wax rich and ever richer upon 
the products of his labor and that of his fel- 
low workers. 

Not without a struggle, however, have 
the laboring classes submitted to the ex- 
ploitation of which they have so long been 
the victims. In our day, to a greater de- 
gree than in any preceding time, the labor- 
ing classes have achieved a degree of soli- 
darity in their age-long struggle for the bet- 
terment of their condition, that promises, 
at no distant day, their complete emancipa- 
tion from the bondage of capitalism. 

From the remotest times of which we 
have any historical record, down through 
the civilizations of ancient Egypt, Greece, 
and Rome, through the feudalism of medie- 
val Europe and the universal commercial- 
ism of modern times, society has been di- 
vided with relation to the production of the 
things which minister to human needs, into 
two classes, namely, a ruling and a serving 



THE CLASS STRUGGLE 37 

class. The former has always been numer- 
ically small in comparison with the latter, 
and has ruled by virtue of its possession of 
wealth or military power. The relations 
between these classes, in the several stages 
of the world's history, are indicated by the 
terms master and slave, master and serv- 
ant, lord and serf, employer and employee. 
Their mutual relations have been character- 
ized, for the most part, by oppression, and 
at times by cruel and inhuman brutality on 
one side, and on the other, by patient sub- 
mission, varied at intervals by uprisings and 
revolts, marked by riot, arson, rapine and 
bloodshed. 

Historians have given little attention to 
the manner of living, or to the murmurings 
of the laboring classes during the periods 
covered by ancient and medieval history; 
choosing rather for their subjects the do- 
ings of the smaller but more powerful ruling 
classes which have more directly contrib- 
uted to the important historical events of 
those times. For that which has passed for 
history is, generally speaking, but the his- 
tory of the ruling classes. There are, how- 
ever, scattered through this history suffi- 
cient references to the conditions of the 
laboring masses to show that they have had, 
at all times, a realizing sense of their 



38 OPERATIVE OWNERSHIP 

wrongs; that they have hoped and strug- 
gled unceasingly for the righting of them ; 
and that their struggles have, in innumer- 
able instances, taken the form of acts of 
violence and bloodshed of a most appalling 
character. 

Within the present generation the class 
struggle has grown more intense than at 
any previous time in the world's history. 
World-wide in extent, the struggle today 
involves on one side the forces of labor or- 
ganized like vast armies, equipped, mobil- 
ized and ready for attack against a com- 
mon foe, and on the other the forces of cap- 
ital, all but as thoroughly organized, and 
ready to make or to resist attack, as the oc- 
casion may demand. Indeed, it may be said 
that rarely if ever are the opposing powers 
entirely at peace, for somewhere in the 
world of industry a battle is always in prog- 
ress; often many battles are going on at one 
and the same time. These battles usually 
take the form of strikes or lockouts, and 
while generally peaceful, they are often at- 
tended by riot and bloodshed, and in very 
many cases by great public inconvenience. 

Mr. Carroll D. Wright, whose means of 
information on that subject were unex- 
celled, writing in 1906, said that "probably 
more strikes and lockouts, and labor dis- 



THE CLASS STRUGGLE 39 

turbances generally, have occurred during 
the last twenty-five or thirty years than in 
all the previous period from the dawn of 
the Christian era."* 

STRIKES AND THEIR COST. 

The economic loss resulting from these 
strikes is startling in its magnitude. In the 
25-year period from 1881 to 1905, inclusive, 
there were, in the United States alone, 36,- 
757 strikes and 1,546 lockouts, making a 
total of 38,303 disturbances involving a ces- 
sation of labor. The total number of per- 
sons who quit work, or were locked 
out from work, within that period was 
7,444,279. The total number of days 
labor lost was 290,923,735.** The aver- 
age number of wage-earners in all manu- 
facturing industries in the United States 
in 1905 was 5,470,321 and the total amount 
of wages paid $2,611,540,532.*** A simple 
computation based upon these figures, and 
counting 52 weeks of 6 working days each 
to the year, will show that the average daily 
wages paid in all manufacturing industries 
in 1905 was $1.53. Now if we compute the 
290,923,735 days lost in strikes and lockouts 



*The Battles of Labor, page 76. 

**Computed from Report of Commissionars of Labor, U. 
S., 1906, page 12. 

***Bulletin 37, Census of Manufacturers, 1905. 



40 OPERATIVE OWNERSHIP 

at this rate per day we shall have a total 
loss in wages of $445,113,314.55. But this is 
only a small part of the economic loss. The 
data for computation of the indirect losses 
are insufficient to produce any accurate re- 
sults. Some idea may, however, be formed 
in regard to them from an examination of 
the indirect losses resulting from certain 
other strikes in which such losses have been 
ascertained with reasonable accuracy. For 
this purpose the anthracite coal strike of 
1902 will serve as well, perhaps, as any oth- 
er. This strike lasted from May 12 to Octo- 
ber 23, 1902; about 147,000 mine workers 
quit work. The loss to employees in wages 
was upwards of $25,000,000; the coal com- 
panies lost, in decrease in receipts, $46,000,- 
000 ; there was spent in relief of the miners 
$1,800,000 and there was lost to the railway 
companies in decrease of receipts from 
freight $47,000,000.* 

The total indirect losses thus shown as 
ascertainable, in addition to the direct loss 
to employees, is $124,800,000, or approxi- 
mately five times the amount lost in wages 
to the strikers. If to the $445,000,000 of 
direct losses in wages, during the 25-year 
period before mentioned, we add the indi- 
rect losses in the same ratio shown in the 



*The Battles of Labor, by Carrol D. Wright, p. 148. 



THE CLASS STRUGGLE 41 

anthracite strike, we shall have a total 
economic loss, directly and indirectly, of 
$2,670,679,887. This was more than the na- 
tional debt incurred in financing the war of 
the rebellion. 

In addition to those items of indirect loss 
already enumerated there are others which 
occur in very many strikes, the nature of 
which does not afford any reliable data for 
calculation as to their amount. Thus in the 
brickmakers' strike in Chicago in 1914 the 
number of persons directly involved in the 
strike was only 2,000. But the strike caused 
a suspension of all building operations in 
that city, throwing 150,000 men out of em- 
ployment, and involving an economic loss 
directly and indirectly, which was roughly 
estimated in the local press at a million dol- 
lars a day.* 

In very many cases strikes were attended 
with rioting and other forms of disorder 
which necessitated the use of the police and 
military forces of the municipality or state, 
involving great expense. Thus, the State of 
Colorado expended over $1,000,000 in the 
suppression of disorder arising out of the 
labor disturbances in that state from 1880 
to 1904. 



*Chicago Tribune, June 3, 1914. 



42 OPERATIVE OWNERSHIP 

EXORBITANT TOLL OF WAGE-CAPITALISM. 

Yet another source of loss too of ten over- 
looked in counting the costs of labor dis- 
turbances is the diminution of efficiency 
of the employees. Every strike or lockout, 
especially where it is of long duration, and 
the struggle becomes severe, leaves the em- 
ployees with a feeling of bitterness towards 
the employer which is certain to militate 
against the employees' efficiency. It is not in 
human nature for an employee to give the 
same degree of care and diligence to the 
service of a master whom he hates, that he 
would give to that of one towards whom he 
entertains a kindly feeling. Many who have 
observed the effects of kindly treatment of 
the laborer, or of special reward, as in the 
case of profit-sharing, as reflected in the 
quantity and quality of the product of la- 
bor, have attested the greater efficiency of 
the employee under the influence of these 
incentives, and have variously estimated 
the ratio of increase of efficiency at from 
10 per cent to 33 1-3 per cent or more. 
* Thus it would seem that in the various 
forms of economic losses above mentioned, 
society, through the wage-earner, the tax- 
payer, and the consumer of industrial 
products, is paying an exorbitant toll to the 
institution of capitalism. 



CLASS STRUGGLE. 43 

But a more serious matter yet remains to 
be mentioned. It is the threatened subver- 
sion of orderly government in the land. 
Year by year the fighting strength of the 
opposing forces in this war of the classes 
waxes greater. Every new battle is fiercer 
than the last, as the contending armies be- 
come better organized. Intimidation, vio- 
lence, riot, arson, murder and insurrection, 
involving the loss of many lives, have 
marked the struggle between the opposing 
forces in several recent conflicts. Within the 
past two years we have seen armed conflicts 
between striking wage-earners and the civil 
and military forces of the state in Michigan, 
Colorado, West Virginia and New Jersey, 
in which many lives have been lost. In one 
case — that of the coal miners' strike in Colo- 
rado — the loss of life and destruction of 
property was on such a scale that a state 
of civil war was declared to exist, and the 
military forces of the United States were 
called upon to restore peace. 

"The contest between capital and labor," 
writes Professor John R. Commons of the 
Commission on Federal Relations, "is more 
serious than any of the other contests. Since 
the year 1877 it has frequently resulted 
practically in civil war, with the army or 
militia called in to suppress one side or the 



44 OPERATIVE OWNERSHIP 

other, according to the will of the executive. 
It is claimed by some that this contest is 
irrepressible and will end in revolution, and 
at least it is plain when the military power 
is called upon to decide a contest, that the 
ordinary machinery of government, which 
is fairly successful in other contests, has 
broken down."* 

A REMEDY OR SOCIALISM. 

Many thoughtful men in every walk of 
life are able to see the trend of events, and 
to recognize that unless some means is 
found to restore industrial peace, and to 
remedy the ills which we have seen in an 
earlier part of this chapter to be the direct 
result of wage-capitalism, the advent of So- 
cialism, which promises a most agreeable, 
and superficially plausible, remedy for the 
ills in question, cannot be long delayed. 

To avert such a catastrophe by a re- 
adjustment of the industrial relations of so- 
ciety on a basis of social and industrial jus- 
tice, and in a manner that will be consistent 
with the existing social order, and will oper- 

♦Report of Commission on Industrial Relations, p. 326. 



CLASS STRUGGLE. 45 

ate to restore and conserve the rights of 
private property and private industry as 
those rights have existed from time im- 
memorial until within a comparatively re- 
cent period, will be the aim of the system 
which will be proposed and explained in the 
following chapters. 






CHAPTER II. 

PROPOSED REMEDIES FOR INDUS- 
TRIAL ILLS. 

SOCIALISM; CO-OPERATION; TRADE UNIONISM. 

We have seen in the preceding chapter 
the rise and development of wage-capital- 
ism, and the evils which have arisen there- 
from. Before setting forth the plan which 
it is the main object of this book to propose 
as a means of correcting those evils it is 
fitting that a brief examination be made of 
the most important of the agencies which 
have been proposed, and to a greater or 
lesser extent applied, as a means with which 
to combat the system of wage-capitalism 
and the evils to which that system has given 
rise. The agencies in question, to a discus- 
sion of which the present chapter will be 
devoted, are Socialism, Co-operation and 
Trade Unionism. I expect to show that in 
the case of Socialism it aims and threatens 
to overthrow the existing social order with- 
out producing any compensating benefit to 
the working classes or to society in general ; 
that in the case of Co-operation, while in 
certain of its phases it is undoubtedly 

46 



REMEDIES FOR INDUSTRIAL ILLS 47 

beneficial, it is lacking in certain respects 
which make it impossible that, in the 
present state of the laws, it will ever 
be able to effect any considerable im- 
provement in the condition of the laboring 
classes; and that, in the case of Trade 
Unionism, while it has worked immeasur- 
able benefit to the laboring classes, and will 
continue to do so, it must go much further 
than its advocates at present seem to con- 
template, if it would be the means of achiev- 
ing the ultimate destiny of the laboring 
classes under an industrial system in which 
there shall be neither master nor servant in 
industrial establishments, but in which the 
workers shall collectively own the capital, 
in the form of the machinery and materials 
with which and upon which they work, and 
carry on their operations under the direc- 
tion of managers appointed and removable 
by themselves. 

SOCIALISM. 

The limits of the present chapter preclude 
a general discussion of the question of So- 
cialism, and compel me to limit the discus- 
sion to such matters as bear most directly 
upon the interests of the working classes, 
and upon the rights of private property 
and private industry. 



48 OPERATIVE OWNERSHIP 

Socialism is defined as "A theory of civil 
polity that aims to secure the reconstruc- 
tion of society, an increase of wealth, and 
a more equal distribution of the products 
of labor, through the public collective own- 
ership of land and capital . . . , and the 
public collective management of all indus- 
tries."* It is a system of society in which 
all the means of production, distribution 
and exchange of the necessaries and lux- 
uries of life are to be owned and managed 
by the government, national, state or mu- 
nicipal, and in which all individual rights 
are supposed to be derived from society. 

The government, as the owner of all the 
land and the houses thereon, is to be the uni- 
versal landlord. As the owner and manager 
of all productive industries, it will be the 
universal employer of labor. As the source 
of all individual rights, it will have power 
to control and regulate the personal affairs 
of the individual in his social, his domestic, 
his religious and all other relations, to con- 
form to the views of the majority, which, 
as to all things and at all times, shall be su- 
preme. With the State as universal land- 
lord, as sole employer of productive labor 
and as general director of what we now con- 
sider the private affairs of the individual, 

*The Student's Standard Dictionary. 



REMEDIES FOR INDUSTRIAL ILLS 49 

the status of the most abject "wage-slave," 
toiling his life away in the service of some 
great corporation, is a veritable dream of 
liberty by comparison with that of the in- 
dividual citizen as tenant, servant and de- 
pendent all in one, under the government of 
such a state. 

SOCIALISM AND INDIVIDUALISM. 

A better understanding of the nature of 
things may often be gained by their ex- 
amination in comparison with their oppo- 
sites. The opposite of Socialism is Indivi- 
dualism. In the Socialistic theory of society 
the State is paramount in all human rela- 
tions. The individual exists primarily as a 
part, and for the use of, the State, possess- 
ing no rights or privileges natural or con- 
ventional, save as a part of the State. "It 
is only by being a citizen of a well-ordered 
state," says Hegel, "that the individual has 
got rights." 

In the individualistic theory of society 
the individual is paramount, and the State 
exists to protect the rights of the individual 
in person and property, as against any oth- 
er individual who might attempt to invade 
those rights, as well as to protect all indi- 
viduals within its jurisdiction, singly and 
collectively, from foreign enemies. 



50 OPERATIVE OWNERSHIP 

The Socialistic theory of the relation of 
the State to the individual, involving the 
paramountcy of the State and the subor- 
dinacy of the individual, finds expression 
today in government control and regulation 
of privately owned industry, in government 
ownership and operation of certain indus- 
tries, in the demand for the ultimate own- 
ership and operation by the State of all the 
instrumentalities of production, and in the 
rapidly growing tendency to enlarge the 
powers and functions of government, and 
to contract the rights, and curtail the free- 
dom of action, of the individual. 

The individualistic theory of the para- 
mountcy of the individual, and the doctrine 
that the State exists only to insure and pro- 
tect individual rights, though not always 
respected in practice, was universally rec- 
ognized in civilized society long prior to 
the establishment of the government of the 
United States, and found eloquent expres- 
sion in the American Declaration of Inde- 
pendence, wherein it is declared that all 
men are endowed by the Creator with cer- 
tain unalienable rights, including the rights 
to life, liberty and the pursuit of happi- 
ness; and that to secure these rights gov- 
ernments are instituted. 

The individualistic theory of the relation 



REMEDIES FOR INDUSTRIAL ILLS 51 

of the government to the individual could 
scarcely be more clearly stated. If that 
declaration be accepted, it follows that if, 
in the exercise of that liberty which is man's 
natural right, he chooses to pursue indus- 
try as a means to happiness, it is the proper 
function, and the duty, of government to 
insure and protect that right rather than 
to impede or restrict it. A denial of this 
proposition involves a repudiation of the 
fundamental principles of the Declaration 
of Independence. 

Conformably to this theory the right of 
the individual to possess property, and to 
freely use, control and dispose of his poses- 
sions, as also to carry on all manner of 
productive industry, free from government 
interference, save in so far as such inter- 
ference may have been necessary to protect 
the equal rights of other individuals, was 
uniformly recognized in America from the 
foundation of the government until a com- 
paratively recent time. During all this time 
the pursuit of industry for the production 
of wealth was deemed the proper sphere of 
individual, as distinguished from govern- 
mental, activity. The abandonment of this 
policy and the adoption of a policy, advo- 
cated by all Socialists, of public ownership 
of industry, when such ownership is not 



52 OPERATIVE OWNERSHIP 

necessary to the proper performance of 
governmental functions, is an adoption, to 
that extent, of the principle of Socialism. 

PRESENT AIM OF SOCIALISM. 

The present aim of Socialism, through 
the achievement of which it is hoped to es- 
tablish the Socialist or "Co-operative" Com- 
monwealth, in which the Socialist ideal is 
to be realized, of a commonwealth which 
shall possess all the land and all the capital, 
and in which the people shall be tenants, 
employees and dependents of the govern- 
ment, is to get control of the existing po- 
litical machinery of society and use it to 
establish the Socialist State. This pur- 
pose is frankly avowed by some of the 
foremost speakers and writers of Socialism. 
In a book entitled The War of the Glasses, 
by Jack London, one of the most popular 
and widely read of Socialist works, that 
author, with admirable candor, says: 

"They intend to direct the labor revolt to 
capture the political machinery of society. 
With the political machinery in their hands, 
which will also give them control of the 
army, the navy and the courts, they will 
confiscate, with or without remuneration, 
all the possessions of the capitalist class 
which are used in the production and dis- 



REMEDIES FOR INDUSTRIAL ILLS 53 

tribution of the necessaries of life. . . . 
In short to destroy present day society, 
which they contend is run in the interest of 
another class, and from the materials to 
construct a new society which will be run 
in their interest."* 

As to the means by which the political 
machinery of society is to be captured, So- 
cialistic opinion is not united. The nearest 
approach to an official declaration of inten- 
tions in that regard is contained in the So- 
cialist Platform adopted at Indianapolis in 
May, 1912, as follows: 

"Such measures of relief as we may be 
able to force from capitalism are but a 
preparation of the workers to seize the 
whole powers of the government, in order 
that they may thereby lay hold of the whole 
system of socialized industry, and thus come 
into their rightful inheritance." 

In other words, every concession to So- 
cialistic sentiment; every measure for the 
adoption of which Socialists contend, includ- 
ing government ownership of public utili- 
ties and mines (which measures they hope 
to have adopted by the aid of many persons 
who would disdain to be called Socialists), 
is to be used to advance, step by step, the 



*The War of the Classes, by Jack London, p. 47. 



54 OPERATIVE OWNERSHIP 

cause of Socialism to the full realization of 
its aims. 

TREND TOWARD SOCIALISM. 

We are approaching a state of Socialist 
domination at a rapid gait, from various 
angles and by various paths. We have seen 
the growing tendency in that direction man- 
ifested by government activities in the con- 
trol of private industry and by the growing 
demand for government ownership of cer- 
tain classes of industries. But these are 
by no means the only manifestations of that 
tendency that are observable. Every pro- 
tracted strike or lock-out, with the bitter- 
ness and class-hatred which it engenders, 
and more especially where the forces of la- 
bor suffer defeat, whether total or partial, 
affords a profitable field for the activities 
of Socialistic propagandists, who find little 
difficulty in making converts. 

"The men who come to us now from towns 
where they have been thoroughly whipped 
in a strike, are among our most active work- 
ing Socialists," said the Socialist Mayor of 
Brockton, Mass., to Professor John Graham 
Brooks, as related by that distinguished 
writer in his admirable work, The Social 
Unrest* Strikes are increasing in numbers 

*p. 65. 



REMEDIES FOR INDUSTRIAL ILLS 55 

and in the degree of bitterness with which 
they are waged; and every strike brings 
its quota of converts to the theories, and 
workers to the ranks, of Socialism. 

Another means by which the goal of So- 
cialistic endeavor may be reached, or which, 
at the opportune time, may bring to the 
battle-front the factor that may be decisive 
in the conflict between the forces of the ex- 
isting social order and those of Socialism, 
is in the practice of the workers in certain 
industries to organize along industrial 
lines, i. e., the several craft unions in each 
industry joining in one large union of that 
industry, as in the cases of the United Mine 
Workers, the Railway Trainmen, and the 
like. This form of organization is the one 
specially advocated by that section of the 
Socialist organization called Syndicalists, 
or Industrial Workers of the World, as lead- 
ing to the "One Big Union" by which the 
industry of the nation may be crippled 
through a general strike. 

A few years ago the locomotive engi- 
neers, for example, on a single road, would 
have made demands upon their employer, 
and perhaps, would have struck if their de- 
mands had been refused by the employing 
corporation. Today it is the engineers and 
firemen of half the nation who make de- 



56 OPERATIVE OWNERSHIP 

mands upon ninety-eight railways com- 
bined. Tomorrow it may be the engineers 
and firemen of the whole nation, and the 
next day the engineers, firemen, trainmen, 
switchmen, shopmen, and all the other trade 
and labor organizations in the railway in- 
dustry in the United States. Whether the 
interval between the several steps above 
mentioned be a day, a year or five years, is 
immaterial so far as the principle involved 
is concerned.* 

The successful working out of the prin- 
ciple involved, as shown in the successes al- 
ready achieved through the partial organi- 
zation of the railway and mining industries, 
augurs the complete success of the plan in 
contemplation, when the organization of 
labor by separate industries shall have be- 
come general. Consciously or unconscious- 
ly to those concerned, the Syndicalist plan 



*Since the above lines were written the engineers, fire- 
men, conductors, and brakemen engaged in the freight 
service of practically all the railways in the country, and 
numbering, according to newspaper reports, about 400,000 
men, have made demands upon their employers for an eight- 
hour day at present day wages, with time and a half for 
over time, which demands the railways have refused. As 
this chapter goes to the printer a strike has been called on 
all the railways to take effect in a few days, which the 
President and Congress are striving to avert, and which, 
should they fail to do, will mean, if long continued, the 
stoppage of all important industries in the country, throwing 
millions out of employment, and will cause incalculable suf- 
fering and innumerable deaths in large centers of population 
dependent upon railway service for their supplies of food 
and fuel. 



REMEDIES FOR INDUSTRIAL ILLS 57 

is being worked out by the organization of 
labor more and more along the lines of 
separate industries. When the plan shall 
have been perfected by the complete organi- 
zation of each of the great industries of 
the country separately, the consummation 
of the Syndicalist plan of confederating the 
several industrial unions into "One Big 
Union," and, at the opportune moment, of 
declaring the general strike and of seizing 
all the means of industrial production — the 
railways, factories, mines and the like — 
which is the ultimate aim of the Syndicalist 
Socialists, would seem to be but a question 
of organization and leadership. 

THE GOVERNMENT IN BUSINESS. 

Among the most powerful forces today, 
making for the ultimate triumph of Social- 
ism and for the overthrow of the present 
social order, is the government in business. 
By this I mean the control of privately 
owned industry as well as the ownership 
and operation of business enterprises by 
government agencies, whether national, 
state, or municipal. I do not include under 
this latter head such industries as are nec- 
essary to be conducted by the government 
in the performance of its ordinary govern- 
mental functions, as the postal service in 



58 OPERATIVE OWNERSHIP 

the case of the national government, and 
water supply in the case of municipal gov- 
ernment, nor anything which stands in a 
subsidiary relation to such enterprises; but 
such as, until a comparatively recent pe- 
riod, have been regarded as within the 
sphere of exclusively private enterprise, and 
free from governmental interference, ex- 
cept as to the ordinary regulations to pro- 
mote the health, safety, and good order of 
society, including the enforcement of jus- 
tice between individuals, singly and collec- 
tively. 

"Few people realize the break-neck speed 
at which we have been drifting into that 
form of Socialism which has to do with gov- 
ernmental control of business," said Senator 
John W. Weeks, of Massachusetts, in an ad- 
dress before the Illinois Manufacturers' As- 
sociation in Chicago, Dec. 8, 1914. To many 
persons who favor the most stringent gov- 
ernmental regulation of private industry 
and yet consider their views altogether con- 
sistent with the strictest regard for the 
rights of property, the idea that Socialism 
has anything whatever to do with govern- 
mental control of business will be rather 
startling. And yet, if they will pause to 
consider the fundamental principle of So- 
cialism as opposed to that of individualism, 



REMEDIES FOR INDUSTRIAL ILLS 59 

they will readily perceive that Senator 
Weeks was right in speaking of govern- 
mental control of business as a form of So- 
cialism. 

As yet the application of Socialistic prin- 
ciples in the form of government-owned and 
government-operated industries has not 
been made in the United States to any 
alarming extent, although there is a strong 
and increasing popular demand for govern- 
ment ownership of certain classes of indus- 
tries. But in Europe, where Socialism is 
much more firmly established than in this 
country, the socialization of industry has 
been carried to a far greater extent than is 
even imagined here, except among Social- 
ists. 

In a book published recently (1914) in 
London, entitled, The Collectivist State in the 
Making, written by Emil Davies, a prom- 
inent advocate of railway nationaliza- 
tion, the author gives a long list of estab- 
lishments embracing a wide variety of 
kinds of businesses, mostly in Europe, but 
including a few in other parts of the world, 
which have already been socialized in the 
sense that they are owned and operated by 
the state or municipality for public con- 
venience or profit. This list comprises up- 
wards of eighty kinds of businesses, man$ 



60 OPERATIVE OWNERSHIP 

of which may be regarded, in one sense or 
another, as public utilities, but much the 
greater number of which belong to that 
class of industries or businesses which, un- 
til a comparatively recent day, has been re- 
garded as within the field of exclusively 
private enterprise.* 

The concluding paragraph of the intro- 
duction to the book above mentioned con- 
tains the following statement: "If Collec- 
tivism is the failure that many people would 
have us believe, it is time some explanation 
was forthcoming to account for its extra- 
ordinary growth throughout the world." 



*The following are some of the kinds of businesses men- 
tioned by Mr. Davies as having been already socialized in 
different parts of Europe and America: Renting of lands; 
renting of dwellings, stores, shops, flats, etc.; operation of 
bridges, ferries, tramways, omnibuses, cables, telegraph, tele- 
phones; forests, timber and other forest products; nurseries 
and botanical gardens ; coal mines ; petroleum oil wells ; gold, 
silver and diamond mines; iron mines; iron works; salt 
mines; chalk pits; natural gas; rubber plantations; potash 
works, producing various salts of that metal; camphor pro- 
duction; opium; bread, flour, meat, fish, and other food 
supplies; municipal restaurants; wine, beer, and spirits; to- 
bacco; cigars and cigarettes; matches; gunpowder; fish- 
breeding; ice factories; grocery, meat and provision supply 
stores ; gas and electric light and power plants ; brick works ; 
quarries, cigar and cigarette factories; clothing factories; 
harness and saddlery factories ; woolen mills ; china and por- 
celain manufactories; contracting of public works; ware- 
houses; grain elevators; cold storage houses; slaughter 
houses; market houses; baker shops; drug stores; general 
stores; tourist bureaux; baths and spas; hotels and board- 
ing houses; theatres; museums; picture galleries; lotteries 
and book-making ; banking ; pawn-shops ; advertising 
agencies ; book publishers ; life, fire, accident, tornado, and 
hail insurance; funeral undertaking; burial grounds and 
crematories. 



REMEDIES FOR INDUSTRIAL ILLS 61 

The same thought has doubtless occurred 
to thousands of other well-informed and 
thoughtful persons who see with amaze- 
ment, mingled with fear or hope according 
to the view point from which it is regarded, 
the extraordinary growth of collectivism, 
or Socialism (to use a more familiar and 
synonymous term). 

The explanation lies in the extraordinary 
skill and vigor with which the Socialist 
propaganda is carried on ; in the world-wide 
circulation of Socialist literature in every 
form, ceaselessly issuing from printing 
presses that never stop ; in the appeal which 
the Socialist theories and promises make to 
the imagination of the poverty-stricken, the 
oppressed, and the discontented among the 
laboring classes; in the hatred engendered 
in the working classes toward the capitalist 
class by the ever-recurring battles between 
capital and labor in what has been called 
"the war of the classes ;" and in the success 
with which the Socialist propagandists have 
played upon the miseries of the poor and 
the oppressed to win their support to a the- 
ory which, upon superficial view, seemed to 
offer some hope of better things, of which 
elsewhere there appeared to be no hope. 



62 OPERATIVE OWNERSHIP 

IS SOCIALISM DFXLINING? 

There is a disposition observable in cer- 
tain quarters of late to regard Socialism as 
having reached the zenith of its influence, 
and to have entered upon a stage of retro- 
gression. This view is based upon a cer- 
tain falling off in the Socialist vote in re- 
cent elections in the more populous sections 
of the United States and in certain portions 
of Europe. 

No more serious mistake could be made 
in regard to Socialism than to imagine that 
it is in a state of decline ; or that the extent 
of its influence is to be gaged by the numer- 
ical strength of the Socialist vote. More- 
over, the falling off of the vote in some sec- 
tions, which is easily explainable upon other 
grounds than that of retrogression,, was 
coincident with a gain in certain other sec- 
tions. 

The strongest proof that not only is So- 
cialism not declining in strength or influ- 
ence, but that its influence has never been 
more widely felt than it is now, is afforded 
by the vast number of laws enacted year 
after year, extending in a thousand ways 
the control of government, national, state, 
and municipal, over private property and 
private industry. Such laws reflect the 



REMEDIES FOR INDUSTRIAL ILLS 63 

spirit of Socialism, with which society, 
without realizing it, is fairly saturated. 

Another proof of the wide prevalence of 
the Socialist spirit may be seen in the rap- 
idly growing demand for the socialization, 
i. e., public ownership, of railways and oth- 
er public utilities. Many non-Socialists, in- 
cluding some who are bitterly opposed to 
Socialism, advocate the socialization of pub- 
lic utilities, and stoutly maintain that pub- 
lic ownership of such utilities is not Social- 
ism. Even some Socialists make the same 
claim, but in a qualified sense. Mr. Morris 
Hillquit, one of the leading American So- 
cialist writers, states the Socialist position 
in this regard when he says that Socialists 
of all countries favor the municipalization 
or nationalization of public utilities, only, 
however, as a measure to be carried out by 
an administration controlled, or strongly 
influenced, by the working classes.* Those 
who are opposed to Socialism, yet who fa- 
vor the socialization of public utilities, 
should bethink themselves that Socialism 
means the socialization, or public owner- 
ship, of all industries, and that every single 
industry that is socialized, whether it be a 
"public utility" or not, is a step towards the 
fulfillment of the Socialistic plan. 



^Socialism in Theory and Practice, p. 287. 



64 OPERATIVE OWNERSHIP 

The total capital employed in the railway 
industry alone in 1910, in the United States, 
was approximately $18,000,000,000 to $20,- 
000,000,000 which amount was about equal 
to the capital employed in all the manufac- 
turing industries of the country combined. 
If to this there be added the capital em- 
ployed in all the other public utilities it will- 
make considerably more than half of all the 
capital employed in productive industry in 
the country, exclusive of farms and mines. 
If to all this there be added the capital em- 
ployed in the coal mining industry, for the 
socialization of which industry there is a 
strong favoring sentiment throughout the 
country, it will be seen that nearly two- 
thirds of all the industrial capital of the 
country would be socialized. 

SOCIALISM A REAL MENACE. 

With the forces mentioned in an earlier 
part of this chapter as explaining the ex- 
traordinary growth of Collectivism of 
which Mr. Davies speaks; with the powers 
of government steadily expanding at the 
expense of individual rights; with the de- 
mand growing daily more wide-spread and 
stronger for the socialization of public utili- 
ties and mines, and the tremendous power 
which the socialization of these industries 



REMEDIES FOR INDUSTRIAL ILLS 65 

involves, in view of the fact, as above 
shown, that they represent much the greater 
part of all the industrial wealth of the na- 
tion; with the certainty that this power, 
when gained, would be used as a lever to 
overthrow the existing social order, and 
"seize the whole power of government in 
order that they may thereby lay hold of 
the whole system of socialized industry"; 
it will be seen that the menace of Socialism 
is no idle dream — no mere bogey designed 
to scare timid capitalists into the adoption 
of measures of social justice; but a very 
real and imminent peril which it behooves 
all who hold in respect the principles upon 
which rest the prevailing social, political, 
and religious systems of civilized society to 
take measures to avert while yet they may. 
If, then, the existing social order is to 
be perpetuated; if labor is to be made free 
and the rights of property secure; if the 
theory of the relations which should subsist 
between the individual and the government, 
as expressed in the American Declaration 
of Independence is to be vindicated, (which 
theory involves, as we have seen, the prin- 
ciple of government as the protector, but 
not the source, of individual rights) ; if the 
rights of individuals, singly or in group, to 
acquire, enjoy and dispose of their prop- 



66 OPERATIVE OWNERSHIP 

erty, free from unnecessary governmental 
control or interference, as contemplated by 
the founders of the government, is to be 
restored — for it no longer exists in its en- 
tirety — Socialism must be eliminated; and 
the activities of government must be re- 
stricted to the business of governing, and 
such related activities as the necessities of 
government, liberally construed, but with 
due regard to individual rights, shall re- 
quire. 

CO-OPERATION. 

The term "Co-operation," in the broad 
sense in which it is sometimes used by 
writers on political economy, embraces al- 
most every form of commercial, agricul- 
tural, and industrial activity in which indi- 
viduals, or groups of individuals, associate 
for the production, purchase, distribution 
or sale of commodities. For the purposes 
of the present work, we are concerned 
chiefly with that form of co-operation which 
has to do with the relations of capital and 
labor employed in the production of com- 
modities, and which has received the name 
of Productive Co-operation. 

Productive co-operation is exemplified in 
a variety of forms which, in the main, may 
be classified under three heads as follows: 



REMEDIES FOR INDUSTRIAL ILLS 67 

(1) Establishments in the ownership of 
which the workers have no part, nor any 
voice in the management, but receive in 
addition to their regular wages, a definite 
proportion of the profits of the establish- 
ment. This form of co-operation is com- 
monly designated as Profit-Sharing. 

(2) Establishments in which the work- 
ers are the owners of a substantial share 
of the capital with which the productive 
operations are carried on, and have in vir- 
tue of such ownership, a voice in the man- 
agement, and receive in addition to the 
standard rate of wages a share in the prof- 
its proportionate to the amount of their 
wages, and a certain other share as the 
earnings of their capital; the remaining 
portion of the capital being owned by non- 
working share-holders. This form of co- 
operation is commonly designated as Labor 
Copartnership, 

(3) Those in which the workers ex- 
clusively own the capital, carry on their 
operations under the direction of managers 
of their own selection, and distribute the 
profits among themselves on an equitable 
and mutually acceptable basis. This also 
is called Labor Co-partnership, which name, 
however, as applied to this class, would seem 
to be rather unhappily chosen, since it fails 



68 OPERATIVE OWNERSHIP 

to indicate any distinction between this and 
the class above described, in which some of 
the profits go to non-working capitalists. 
To indicate the status of such a group as 
the last above mentioned the name of Oper- 
ative Ownership would seem a much more 
appropriate appellation, as will be shown in 
a later chapter,* 

PROFIT-SHARING AND LABOR COPARTNERSHIP. 

Under the name of Profit-Sharing as 
above defined there is embraced a wide va- 
riety of co-operative schemes. In most of 
these the capitalist, with a view to evoking 
a higher degree of efficiency in his em- 
ployees, allows them to participate in the 
profits to a very limited extent, so that the 
increased efficiency of the operatives, aris- 
ing from the hope of greater reward, will 
not only produce all that they receive as 
their share in the profits, but will also yield 
to the capitalist a larger profit than he 
would otherwise realize. Such arrange- 
ments, besides obviating much of the fric- 
tion incident to the ordinary wage system, 
form a cheap sort of insurance against 
strikes, by attaching to the privilege of par- 
ticipation the condition that the employees 
shall take no part in any strikes; and in 



*See Chapter III. infra. 



REMEDIES FOR INDUSTRIAL ILLS 69 

some cases, that they shall not be members 
of a labor union. 

Not all profit-sharing establishments, 
however, are actuated by the motives of 
those referred to in the preceding para- 
graph. Some, though unfortunately a 
small minority, give their employees a very 
substantial share in the profits in addition 
to the standard rate of wages, without im- 
posing any restrictions upon the employees 
in regard to membership in labor unions, 
and some even encourage such membership. 
But the workers are given no voice in the 
management, and no hope is held out to 
them that they can ever acquire any inter- 
est in the establishment, or be anything but 
employees though they work a lifetime in it. 

The third class of co-operative schemes 
mentioned in the foregoing classification, 
that in which the workers collectively are 
the sole owners of the establishment in 
which they carry on their operations, is 
exemplified in a multiplicity of concerns 
which were started in a small way by the 
workers, with capital contributed by them- 
selves, many of which have grown to very 
respectable proportions. This class also 
comprises many large concerns which, or- 
iginally established and conducted on capi- 
talistic lines, were afterwards changed into 



70 OPERATIVE OWNERSHIP 

copartnership establishments in the man- 
ner described in the preceding paragraph, 
and finally evolved into complete operative- 
owned establishments when the original 
capitalist owners, having acquired a suffi- 
cient store of wealth to satisfy their de- 
sires in that regard, and being desirous of 
further rewarding those by whose skill and 
labor, first as employees and later as part- 
ners, their wealth * was produced, trans- 
ferred to the workers or operatives their 
remaining interests in the establishments, 
to be paid for out of the future profits. 

A brief description of one or two estab- 
lishments which exemplify the form of 
labor copartnership under discussion, 
which in their main features have served 
as models for many others, and which are 
frequently mentioned in the writings of 
economists, will serve to illustrate the prin- 
ciple of labor co-partnership, and the man- 
ner in which it was applied, better, perhaps, 
than any description in general terms which 
I could give. 

THE MAISON LECLAIRE. 

Probably the first establishment to ex- 
emplify the principle of labor co-partner- 
ship on a scale and in a manner to attract 
attention was that known as the Maison 



REMEDIES FOR INDUSTRIAL ILLS 71 

LecJaire. This establishment was founded 
by Edme Jean Leclaire, a contractor of 
house-painting, of Paris, in 1827. In 1838 
he induced his permanent workmen to form 
a Mutual Benefit Society to provide for 
mutual help in time of sickness, and this 
society became the nucleus of the co-opera- 
tive scheme which he afterwards estab- 
lished. 

In 1842, recognizing that by greater dili- 
gence and care of tools and materials his 
employees could largely increase the prof- 
its of his business, he introduced a system 
of profit sharing with a view to furnishing 
them with an incentive for the exercise of 
these virtues, as well as to make provision 
for their old age. "I saw," said Leclaire, 
"that it paid me better to make more and 
to give an interest in the profits to my 
workers who helped me, than to make less 
and give them no such interest." John 
Stuart Mill, in his Principles of Political 
Economy* speaking of M. Leclaire's rela- 
tions with his employees at this period 
says: "He assigns to himself, besides in- 
terest for his capital, a fixed allowance for 
his labor and responsibility as manager. 
At the end of the year the surplus profits 
are divided among the body of employees, 

♦Book IV, Ch. VIII, Sec. 5. 



72 OPERATIVE OWNERSHIP 

himself included, in the proportion of their 
salaries." 

Under the profit-sharing system the hours 
of labor of the employees were reduced; 
the ordinary wages were maintained at the 
highest rate paid for the same class of labor 
anywhere in the city, to which wages the 
workers' share of the profits formed a sub- 
stantial addition. The business increased 
greatly under the new system, and the prof- 
its of the owner increased correspondingly. 

In 1863 the Mutual Benefit Society was 
incorporated and was made a partner in 
the business, and in 1869 the business itself 
was incorporated, with a capital of $60,- 
000 of which M. Leclaire held $20,000. For 
the future government of the society M. 
Leclaire prepared and put in force an in- 
strument in the nature of a constitution, 
which he called the "Charter of Labor," 
which prescribed minutely and at length 
the details for the management of the estab- 
lishment. M. Leclaire soon after withdrew 
his share of the capital and retired from 
Paris to a country place where he soon after 
died, leaving a fortune of over 1,200,000 
francs as the result of his success, which 
he attributed to the scheme of labor co- 
partnership. 

The house of Leclaire (now known as 



REMEDIES FOR INDUSTRIAL ILLS 73 

Brugniot, Cros, et Cie,) is still in a pros- 
perous condition, having increased its capi- 
tal to more than double what it was when 
M. Leclaire withdrew from the concern. 
The capital is held, pursuant to the "Char- 
ter of Labor/' five-eighths by the Mutual 
Aid Society, and three-eighths by the Man- 
aging Partners, of which there are two. 
These are elected for life by a chosen body 
of workers, but may withdraw at will or 
may be removed for certain reasons and in 
a certain manner prescribed by the char- 
ter. The capital receives 5 per cent, inter- 
est and the net profits after that are ap- 
portioned as follows: 50 per cent, payable 
in cash to the workers, of all classes, in 
proportion to wages; 35 per cent, to the 
Mutual Benefit Society; and 15 per cent, to 
the Managing Partners, who, in addition to 
their share in the profits and interest on 
their capital, receive a salary of $1,200 a 
year. 

THE FAMILISTERE SOCIETY OF GUISE. 

One of the most widely known of all the 
establishments in which the principle of 
Labor Co-partnership is exemplified is that 
known as the Familistere Society of Guise. 
This establishment was founded by M. Jean- 
Baptiste Andre Godin for the manufacture 



74 OPERATIVE OWNERSHIP 

of stoves and other iron utensils of house- 
hold use. From a small beginning the busi- 
ness under the management of M. Godin 
grew rapidly to Jarge proportions. 

From an early period in the career of M. 
Godin as a manufacturer he seems to have 
contemplated the development of his estab- 
lishment, with regard to its relations with 
its workers, along communistic lines, mod- 
eled after the systems elaborated by M. ; 
Fourier, with communal workshops, com- 
munal dwellings, communal stores, etc. In 
furtherance of this idea M. Godin, in 1859, 
commenced the erection of the familistere 
or communal apartment house for his em- 
ployees, building one part at a time, and 
gradually developing a system of communal 
dwellings, stores, schools, parks, boule-' 
vards, bath houses, theatre, restaurant, 
and in short, all the necessaries of a self- 
contained community. 

For the purposes of this examination we 
are, however, concerned chiefly or wholly 
with the industrial phase of M. Godin's 
enterprise, for in that respect, and that 
only, it has served as a model, in some of 
its most important features, for many other 
co-operative establishments in which the 
principle of labor copartnership has been 
applied. 



REMEDIES FOR INDUSTRIAL ILLS 75 

In 1880, having some years previously 
introduced the principle of profit-sharing 
in his establishment, M. Godin organized, 
in legal form, the society, composed of him- 
self and his workmen, to which he gave the 
name of the "Familistere Society of Guise." 

A constitution, the result of long and 
careful deliberation by M. Godin, was 
drawn by him, and formally adopted at a 
meeting of the workmen held for that pur- 
pose. This instrument provided for the 
organization and future regulation of the 
affairs of the society in minute detail. 

M. Godin, at the time of the organization 
of this society, transferred to it his entire 
establishment, at a valuation of 4,600,000 
francs ($887,800), the fairness of which 
valuation has never been questioned. He 
received in exchange "founder's certifi- 
cates^ to the full value of the establishment. 
These certificates constituted the provision- 
al capital stock of the society. They bore 
interest at the rate of 5%, in addition to 
which the holder participated in the net 
profits of the establishment in common with 
the workers, on the theory that where capi- 
tal was employed in industrial production, 
it was entitled to wages the same as labor — 
the wages of capital being the interest — and 
that both should participate in the net prof- 



76 OPERATIVE OWNERSHIP 

its in proportion to their wages without 
distinetion between wages of labor and 
wages of capital. 

It was provided in the constitution that 
the share of the profits payable to the 
workers, in addition to the standard rate 
of wages, should all be applied to the pur- 
chase of founder's certificates, which was 
done, and new certificates, which were 
called "savings certificates" were issued in 
like amounts, and distributed to the workers 
according to the share of the profits which 
each was entitled to receive. The savings 
certificates were to receive the same rate 
of interest and the same share in the prof- 
its as the founder's certificates. When all 
the founder's certificates had been taken up 
and paid for with the savings of the work- 
ers, the latter became the sole and absolute 
owners of the establishment This point 
was reached in 1894.* The establishment, 
in all its branches, was still in successful 
operation at the beginning of the great Eu- 
ropean war, but it has since been reported 
as utterly destroyed in that catastrophe. 

The co-operative schemes of Godin and 
Leclaire, while differing widely in many im- 



*Industrial Communities, by W. F. Willoughby, in Bulletin 
of the Department of Labor, September 1896; Co-partnership 
in Industry, by C. R. Fay, pp. 37-58; Co-partnership and 
Profit-Sharing, by Aneurin Williams, pp. 116-136. 



REMEDIES FOR INDUSTRIAL ILLS 77 

portant matters of detail, possess many 
fundamental features in common. Both 
have exemplified the principle of Labor Co- 
partnership in the successive stages of 
profit-sharing, part-ownership and com- 
plete ownership, of the means of produc- 
tion by those who work, with hand or brain, 
in productive operations ; and both exempli- 
fy a certain trend of industrial development 
from profit-sharing to co-partnership 
(using the former term in a true sense, and 
not as a scheme of anti-strike, anti-trade- 
union insurance), and from copartnership 
to complete ownership by the workers. 

SLOW PROGRESS OF CO-OPERATION. 

But the adoption of the principle of co- 
operation in the forms exemplified by Godin 
and Leclaire depends wholly upon the will 
of each individual employer, as affected by 
his benevolent disposition and his sense of 
justice, or the lack of these virtues; and 
while many employers possess them abun- 
dantly, such employers are, relatively to the 
total number of employers, insignificantly 
few. While this condition continues in in- 
dustrial relations, the progress of the form 
of co-operation involving the principle thus 
exemplified must necessarily be slow. 

Nearly a hundred years have elapsed 



78 OPERATIVE OWNERSHIP 

since Robert Owen first advocated the prin- 
ciple of co-operation between capitalist and 
laborer on a basis that would secure to the 
latter a more equitable share of the produce 
of his labor. Philanthropists, political econ- 
omists, sociologists, in every generation 
from that time to the present, have written 
and spoken in advocacy of the same prin- 
ciple; yet the number of establishments in 
which any approach to a just distribution 
of the produce of labor, as between work- 
ers and capitalists, is made, may be 
reckoned in scores, where those in which 
the capitalistic principle of the most work 
for the least money is applied may be 
reckoned in tens of thousands. 

Nor is there any reason to hope that that 
form of co-operation in which the workers 
not only have a direct interest in the prof- 
its of their own work, but are also the 
owners, in whole or in part, of the capital 
with which it is carried on, as exemplified 
in the systems of Godin, Leclaire and many 
others who have followed their example in 
principle if not in detail, will ever become 
general so long as its adoption depends upon 
the voluntary act of each individual em- 
ployer of labor. 



REMEDIES FOR INDUSTRIAL ILLS 79 

WHAT CO-OPERATION LACKS. 

Undoubtedly the schemes inaugurated by 
Godin, Leclaire, and their followers embody 
the principle wherein lies the ultimate solu- 
tion of the labor problem through the 
ownership and management by the workers 
of the means of industrial production. But 
there is lacking in the various schemes 
above described for the solution of that 
problem, something vitally essential to 
their efficacy, and which must be supplied 
before the principle in question will ever 
be adopted on a scale sufficiently broad to 
affect, to any appreciable extent, the status 
of the laboring classes in general. The 
thing that is lacking is a means whereby 
the adoption of the principle of joint par- 
ticipation in management and profits, and 
joint ownership, by capital and labor, may 
be made, by law, obligatory upon indus- 
trial capitalists in general, while scrupu- 
lously respecting their legal and ethical 
rights of property. Under the operation of 
such a system all capitalists would have to 
conform to the requirements of social jus- 
tice in dealing with their workers, where 
now it is left to their own free wills to do 
so or not, and only a comparatively few 
conform to those requirements. 



80 OPERATIVE OWNERSHIP 

TRADE UNIONISM. 

The most successful and, as judged by its 
achievements, the most practical agency 
for the betterment of the condition of the 
laboring classes, which has hitherto been 
proposed or put into operation, is that of 
Trade Unionism. Not all other agencies 
combined have accomplished a tithe as 
much in that regard as has this single 
agency. 

It is chiefly through Trade Unionism that 
working hours in industrial establishments 
have been reduced from fourteen, and in 
some cases sixteen, a day to ten, nine or 
eight; that conditions of labor with regard 
to health and safety from accidents have 
been vastly improved ; that liability for ac- 
cidents incident to the employees' work has 
been placed by law upon the employer; that 
regulations governing the employment and 
conditions of labor of women and children, 
with a view to conserving their health and 
safety, and scores of other regulations for 
the benefit of the laboring classes have been 
established by law. It is chiefly through 
unionism that wages have been increased 
by from one hundred to two hundred per 
cent or more in little more than a single 
generation — a gain, however, which is abso- 
lute rather than relative; and which is 



REMEDIES FOR INDUSTRIAL ILLS 81 

largely, if not wholly, offset by the in- 
creased cost of living; but without which 
the situation of the laboring classes would 
be deplorable indeed. 

Trade unionism found the laboring man 
prone upon the earth at the feet of his capi- 
talist master, with the master's foot upon 
his neck. It has raised him to an upright 
posture, head erect, and level with that of 
his master. It found him a cringing, fawn- 
ing, suppliant thing. It has imbued him 
with a sense of the dignity of manhood and 
of the rights of labor. It found him with- 
out the spirit to look his master in the face 
and ask for what was his due — a just share 
of the wealth which he produced. It has in- 
spired him with a sense of his deserts, and 
with the spirit to stand face to face and eye 
to eye with that master and to demand his 
rights — nor need he bow the head nor 
drop the eye in making his demand. It 
found him with the spirit of a slave, and it 
put into him the soul of a man! 

We saw in the last preceding chapter 
that organized labor carries on cease- 
less warfare with capital for the rights of 
labor. But its activities have been by no 
means confined to struggles between em- 
ployer and employee. A very large part 
of its achievements have been won through 



82 OPERATIVE OWNERSHIP 

the medium of public opinion, to the forma- 
tion of which the energies of organized labor 
are steadily and intelligently directed. To 
this influence, in large measure, and in part 
also to the influence of organized labor 
operating directly upon legislative bodies, 
is due the enactment of that large body of 
laws, so beneficial to the laboring classes, 
which are usually referred to by the general 
title of Labor Legislation. 

By means of legislation brought about in 
this manner labor has won in innumerable 
instances, rights and benefits for which it 
had striven long and vainly by direct nego- 
tiation with capitalist employers, and which 
rights, had they not been won by legisla- 
tion, would, doubtless, have been the subject 
of many a bitter struggle between capital 
and labor, with the usual incidents of class 
hatred and economic loss which invariably 
attend such struggles, when waged by 
means of the strike or the lockout, the boy- 
cott or the blacklist. 

TRADE AGREEMENTS. 

The highest achievement of organized 
labor is the trade agreement. Under this 
system the principle of collective bargain- 
ing, for which organized labor has fought 
so strenuously and persistently from the be- 



REMEDIES FOR INDUSTRIAL ILLS 83 

ginning, is recognized to the full. The capi- 
talist, or association of capitalists, by its 
representatives, confers directly with the 
representatives of the labor union, and an 
agreement is entered into fixing the wages, 
hours and conditions of work during the 
life of the agreement, and providing a 
method for the peaceful settlement of any 
disputes which may arise under the agree- 
ment or in relation to the matters embraced 
therein. 

In general trade agreements are entered 
into, not between a single establishment 
and its employees, but between an associa- 
tion of all or a number of establishments in 
a given industry and in a given locality, on 
the one side, and the unions representing 
all the employees of those establishments, 
on the other, and cover not only the rate 
of wages and certain details of manage- 
ment — such for instance as the employment 
and discharge of workers, the number of 
apprentices, and the like, but in some cases 
the prices at which the product shall be 
sold. 

The system of trade agreements, notwith- 
standing that it marks a distinct improve- 
ment in the relations between capital and 
labor, is not to be understood as an ideal 
scheme for the unification of the in- 



84 OPERATIVE OWNERSHIP 

terests of capital and labor. It is merely a 
method of peaceful settlement for a limited 
period of time, of questions upon which the 
opposing interests of employers and em- 
ployees predispose them to disagree; a sys- 
tem in which the representatives of the op- 
posing interests meet in joint conference, 
bluff and wrangle, each side striving to gain 
an advantage over the other, and finally 
compromise, rather than resort to the 
strike, the boycott, or other form of indus- 
trial warfare.* 

Trade agreements were known in Eng- 
land as early as 1860, and the system is said 
to be highly developed in that country. In 
the United States it has been less kindly re- 
ceived by the capitalist class, although of 
late years the system has been more freely 
adopted than formerly. It is still, however, 
confined to a comparatively small number 
of industries and localities. It has not 
eliminated strikes, although its tendency is 
to lessen the frequency of their occurrence. 
Wherever the system of trade agreements 
has been adopted it has been a distinct tri- 
umph for the principles of unionism. 

"It has often been said of late," writes 
President Emeritus Charles W. Eliot, of 



^History and Problems of Organised Labor, by Frank 
Tracy Carlton, pp. 243-245. 



REMEDIES FOR INDUSTRIAL ILLS 85 



Harvard University, "that the joint agree- 
ment is the real goal of unionism/ 



»# 



THE TRUE GOAL OF TRADE UNIONISM. 

The question as to what will be the future 
of unionism is one concerning which there 
is much speculation among publicists and 
sociologists at the present time. That with 
the general adoption of the system of trade 
agreements, the goal of unionism will have 
been gained is the belief of many, as indi- 
cated by the words above quoted from 
Doctor Eliot. If this be true, the attain- 
ment of the goal would leave nothing more 
to be achieved, so far as the demands of 
labor were concerned, and the principal ob- 
ject of unionism thereafter would only be 
to support the claims of labor in the joint 
conferences between the representatives of 
capital and labor respectively; and, if nec- 
essary, to enforce the demands of labor by 
means of the strike, in the event that the 
conferees should fail to effect a mutually 
satisfactory agreement. 

The better opinion, as it seems to me, is, 
not that organized labor has any specific 
reform or achievement in contemplation to 
whi9h its efforts are consciously directed as 

*The Future of Trades-Unionism and Capitalism in a 
Democracy, p. 32. 



86 OPERATIVE OWNERSHIP 

a goal; but that it exists for the advance- 
ment of the interests of the laboring classes 
by the advocacy of any measure which, from 
time to time shall seem beneficial; for the 
resistance of any measures which may seem 
injurious to those rights and interests; and 
to meet and deal with any exigencies, in- 
dustrial or political, affecting the laboring 
classes, as such exigencies may arise. 

But if Trade Unionism is to be the instru- 
ment through which the higher and ultimate 
destiny of the laboring classes is to be 
worked out — a state in which they shall 
have no employers with whom to wrangle 
about wages, and no trade agreements to 
make or to enforce, but in which the work- 
ers shall be their own capitalists, owning 
collectively the capital with which they car- 
ry on their productive operations — it must 
do something more than maintain its or- 
ganization for the purpose of carrying on 
a campaign for higher wages and better 
conditions of work ; and must do more than 
safeguard the rights and interests of labor 
in any industrial or political developments 
which may affect those rights and interests. 
It must adopt and pursue some definite plan 
tending to bring about and hasten the reali- 
zation of that destiny. 

For it is not to be supposed that so pow- 



REMEDIES FOR INDUSTRIAL ILLS 87 

erful an organization of the laboring 
classes as we have in America today would 
be content with the system of trade agree- 
ments, or with any other arrangement of 
industrial affairs which contemplated as a 
permanent institution the relation of mas- 
ter and servant, or — to use a less harshly 
sounding term meaning the same thing — 
employer and employee, without striving 
for the greater moral and material benefits, 
and the greater industrial freedom involved 
in some form of partial or complete owner- 
ship by the workers, of the means of indus- 
trial production. The system of trade 
agreements, which Doctor Eliot regards as 
the highest achievement and the goal of 
organized labor, however great may be its 
advantages as compared with the system at 
present generally prevailing in industrial 
relations, involves the continuation of the 
relation of master and servant in the field 
of industrial production. As a permanent 
system it would mean the establishment of 
a serving class and a master, or ruling, class, 
somewhat resembling the plebeian and the 
patrician classes of ancient Rome. How- 
ever well the trade agreement system might 
serve to mollify the feelings and increase 
the wages of the laboring classes, there 
would still remain, among its inseparable 



88 OPERATIVE OWNERSHIP 

attributes, two of the most odious features 
of capitalism, namely: the working class 
would still be the hired men and hired wom- 
en of the master class; and the master class 
would still live, not by its own labor, but 
by appropriating the product of the work- 
ers' labor, by right of the mere ownership 
of the tools with which the latter work. 

There is inborn in every human breast 
an instinctive desire for liberty. After 
numberless ages of development this desire, 
in so far as it related to political conditions, 
found expression in various portions of the 
earth and at various times, in the demand 
for civil and political independence. It has 
been realized in part in several modern 
states whose peoples are politically self- 
governing. But the principle of industrial 
liberty has not developed as rapidly as has 
the principle of political liberty, and side by 
side with political freedom there exists in- 
dustrial bondage. 

With the attainment of the working 
classes to higher standards of education, 
and the growth among them of the habit 
of general reading which the last genera- 
tion has witnessed, they have gained a 
higher conception of the dignity and the 
rights of labor. The spirit of industrial 
liberty is moving among them, and they are 



REMEDIES FOR INDUSTRIAL ILLS 89 

beginning to demand some measure of self- 
government in industrial affairs. The day- 
is coming, and I believe it is near at hand, 
when the laboring classes will demand not 
only their full equitable share of the prod- 
ucts of their toil, but an equal voice with 
their capitalist associates in the manage- 
ment of the establishments in which the 
labor of the laborers and the capital of the 
capitalists are jointly employed, and the 
right to acquire, at a fair price, and own, a 
substantial interest in the establishments in 
which they work. For they will not always 
be content to be mere wage earners, depen- 
dent upon the will of a master for the op- 
portunity to earn a living. 

Whoever, therefore, would set a goal for 
the achievement of organized labor, or set 
a limit to the aspirations of the laboring 
classes, short of the absolute industrial in- 
dependence which is to be realized only by 
the collective ownership of the tools of in- 
dustrial production by the several groups 
of persons who work with those tools, mis- 
conceives both the spirit of the laboring 
classes and the irresistible tendency of 
social development in the field of industrial 
production. 

If the ownership of the tools of indus- 
trial production is profitable to the capital- 



90 OPERATIVE OWNERSHIP 

ist owners, such ownership would be prof- 
itable to the workers, including both hand 
and brain workers. If the small measure 
of control which the workers are able to 
exert in the management of industry under 
the trade agreement system is an advan- 
tage, the complete control which appertains 
to complete ownership is better. If the in- 
crease in the wages of labor which it is 
hoped to realize through trade agreements 
is good, the whole produce of labor, which 
would go to the laborers when they should 
be the sole owners of the tools of labor, with 
no non-working capitalists to take any part 
of the profits in the form of dividends or 
otherwise, would be better. 

The ownership by the workers of the 
tools and materials with which, and upon 
which they work is, then, the ideal condi- 
tion, from the workers' point of view, of 
industrial production ; and whether it is to 
be achieved by the plan which I shall sug- 
gest in the next chapter of this book, or by 
some other means, that, and that only, is 
the natural and logical goal of trade-union- 
ism. 



CHAPTER III. 
OPERATIVE OWNERSHIP. 

THE TERM DEFINED. 

From the brief examination of the re- 
lations subsisting in the industrial world 
between capital and labor which was made 
in the preceding chapters, and from the 
condition of the laboring classes in their 
social and industrial relations thereby dis- 
closed, it is obvious that some means must 
be found of«effecting a more equitable ap- 
portionment as between the capitalist and 
the worker, of the wealth produced through 
the exercise of their combined functions, as 
well as of meeting the natural and reason- 
able aspirations of the workers for some 
measure of industrial self-government, if 
the strife and bitterness of class warfare is 
to cease, and the existing social order is to 
be perpetuated. Such a means, I confidently 
believe, will be found in the scheme of Oper- 
ative Ownership, to a description of which 
the present chapter will be devoted. 

Operative Ownership, as the term indi- 
cates, means, in a literal sense, as applied 

91 



92 OPERATIVE OWNERSHIP 

to industrial relations, the ownership of in- 
dustrial establishments by the operatives 
collectively who are employed therein. In 
another and less exact sense, and one in 
which it will be sometimes used in this book, 
it is to be understood as applying to the sys- 
tem herein proposed by which, after pass- 
ing through the transitional stages of, first, 
joint operation of industrial establishments 
by the capitalist owners and the operatives 
collectively, and, later, joint ownership of 
these establishments by capitalists and oper- 
atives, the final stage of the system, or com- 
plete ownership by the operatives, will be 
achieved. 

We are familiar with the terms "private 
ownership," "public ownership," "munici- 
pal ownership," "government ownership," 
and the like, as indicating the nature of the 
group or collectivity by which a given in- 
dustry or establishment is owned. The 
term Operative Ownership will serve a like 
purpose in the case of establishments owned 
in whole or in part by the operatives, and 
while indicating the nature of the owner- 
ship of establishments exemplifying that 
system, it will also serve to differentiate the 
system to which it is applied, and which is 
essentially co-operative in its nature, from 
other schemes which, while they embody 



OPERATIVE OWNERSHIP 93 

in some measure the fundamental principle 
of productive co-operation, are neverthe- 
less radically different in many essential 
features from the one under consideration. 

For the past two or three generations 
political economists and statesmen have 
labored assiduously to devise some means 
to eradicate those social and economic evils, 
the existence of which provoked that dis- 
sension and strife between labor and capital 
of which a brief description was attempted 
in the first chapter, and which of late years 
have come to be known as "the war of 
the classes." They failed because, as a gen- 
eral rule, they confined their theorizing or 
their investigations, which was the sum of 
their achievements, to expedients which 
would not conflict with the principle of cap- 
italism, in any of its phases, which institu- 
tion they seem to have regarded as too 
sacred or too powerful to be assailed. 

Those, on the other hand, who, like Marx, 
Engels, Leibknecht, and others, saw nothing 
to be admired or respected in capitalism, 
went to the opposite extreme of regarding 
that institution as the sum of all human in- 
iquities, and would overthrow not only the 
institution itself, but the whole social fabric 
upon which it rests. 

Many profound observers and students of 



94 OPERATIVE OWNERSHIP 

social and economic conditions, however, 
have regarded capitalism as a thing neither 
too sacred to be assailed, nor so vicious that 
the whole social fabric must be overthrown 
because of it. Such persons recognize that 
the existing social order, the central idea 
of which is the right of private property, 
does not to any extent whatever depend on 
capitalism, which is but a single phase of 
the institution of private property, which 
latter institution existed thousands of 
years before capitalism was heard of, and 
would persist though capitalism in every 
form should be abolished. 

FUNDAMENTAL ERROR OF THE CAPITALIST 
THEORY. 

The fundamental principle of wage-capi- 
talism involves the assumption that labor 
is a commodity. Upon this theory capital- 
ism attempts to justify its treatment of the 
working classes and its conceptions of the 
relations which should subsist between capi- 
tal and labor. This theory has had the sup- 
port of some of the most eminent political 
economists from the days of Adam Smith 
to the present time. Even many of the 
leaders of the laboring classes, as well as 
writers who advocate their cause as against 
that of capitalism, accept this theory with- 



OPERATIVE OWNERSHIP 95 

out question. That it is fundamentally un- 
sound is susceptible of easy demonstration. 
The term, "commodity," is defined as 
"goods, wares, merchandise; anything 
movable which* is or can be bought and 
sold."* Human labor cannot in a true sense 
be bought and sold because it does not exist 
apart from the laborer who performs it. 
The blood, tissue, energy, and intelligence, 
which are expended in the form of labor are, 
until so expended, a part of the laborer him- 
self ; and to buy these unexpended elements 
of potential labor it would be necessary to 
buy the laborer, which since slavery is 
abolished, can no longer be lawfully done. 
Labor is the act of transforming these con- 
stituents of the human organism, in combi- 
nation with external substances, into a new 
product; but until the transformation is ac- 
complished the human elements of the com- 
bination are still blood, tissue, energy and 
intelligence ; while after the transformation 
they are not labor but the product of the 
combination above mentioned. The textile 
manufacturer may buy in the open market 
the wool, cotton, silk, chemicals, dye stuffs 
and other wares used in the manufacture of 
cloth. These, as well as the machinery used 
in manufacture, may be bought and sold. 



♦Webster's Dictionary. 



96 OPERATIVE OWNERSHIP 

They are chattels. Between them and the 
owner or vendor there is no physical rela- 
tion or connection. The manufacturer buys 
his machinery and materials; he may em- 
plop labor; and when we speak of employ- 
ing labor we mean employing the laborer, 
since labor and the laborer are one and in- 
separable. If labor cannot be employed 
without employing the laborer, neither can 
it be bought without buying the laborer. 
Not being a subject of purchase and sale, 
labor cannot therefore, in any true sense, 
be said to be a commodity. 

Capital, however, regarding labor as a 
chattel or commodity and subject to pur- 
chase and sale, has insisted that when it has 
purchased labor for the lowest price at 
which it may be obtained, the laborer has 
no more right to claim any share in the pro- 
duce of his labor beyond the price which the 
capitalist has agreed to pay for it in the 
form of wages, than the seller of any of the 
other articles used in productive operations 
would have to claim a share in the products, 
beyond the agreed price of the thing sold. 
To this manner of treatment labor is 
compelled by its necessities to submit. 
It cannot work without tools, nor with- 
out materials to work on. The tools of 
modern industry are costly machinery. 



OPERATIVE OWNERSHIP 97 

Modern productive processes to be profit- 
able must be continuous. This requires a 
large amount of raw materials to be carried 
in stock. Machinery and materials repre- 
sent capital, which the laborer lacks, hence 
he must have recourse to the capitalist. 

MUTUAL NEEDS OF CAPITAL AND LABOR. 

Machinery will not operate itself, nor will 
inanimate materials subject themselves to 
mechanical operations. These are the func- 
tions of labor; and these the capitalist, as 
such, cannot perform. Capital and labor 
are powerless, therefore, to carry on pro- 
ductive operations, one without the other. 
Their mutual interests and needs impel them 
to combine, but capital insists on dictating 
the terms upon which they will combine, 
namely: that labor must submit to be 
treated as a commodity, while capital con- 
trols the productive operations and appro- 
priates the products. 

The same motives of expediency and just- 
ice which from very remote ages have 
prompted society to curb the physically 
strong and protect the physically weak, 
when the former would use their strength 
to oppress the latter in their social rela- 
tions, should prompt society, it would seem, 
in this highly civilized and enlightened age, 



98 OPERATIVE OWNERSHIP 

to curb the industrially strong and protect 
the industrially weak where the former 
would use its superior strength to oppress 
the latter in their industrial relations. But 
society looks complacently on while capital 
by means of its strength imposes upon la- 
bor an industrial system whereby the latter 
is reduced to a state of servility to the for- 
mer when both should stand upon an equal- 
ity one with the other. 

For there is nothing in the nature of the 
functions performed by capital and labor, 
respectively, operating in conjunction with 
one another in the production of wealth, 
which, of itself, gives to the capitalist the 
sole, or even the superior, right to control 
absolutely the productive operations, and 
appropriate to itself the whole product 
of those operations, beyond what is re- 
quired for a meager or even a comfortable 
subsistence for the laborer. Indeed, if the 
relative importance of the respective factors 
of capital and labor and the functions which 
they severally perform, were to be taken as 
the criterion of their respective values, it 
would seem that labor were entitled to much 
the larger share in the products. 

To the joint operations capital contributes 
a machine — a composition of wood or metal, 
the invention and the handiwork of man. A 



OPERATIVE OWNERSHIP 99 

marvelous contrivance, it may be, indeed, 
as human contrivances go ; but without the 
hand and the intelligence of man to guide 
and operate it, a mere collection of metal or 
wooden parts. Labor contributes to the 
process also a machine, but a machine of 
flesh and blood and intelligence. A machine 
not of man's contrivance, but the work — the 
masterpiece — of God's infinite intelligence 
and power, as far transcending in its mar- 
velous perfection the machine of human con- 
trivance as the infinite intelligence and 
power of God transcends the feeble intelli- 
gence and power of man. 

STRIFE BETWEEN CAPITAL AND LABOR. 

The right claimed and exercised by capi- 
tal to dictate the terms upon which it will 
combine its functions with those of labor, 
however speciously it may be defended by 
certain economists, and by advocates of the 
theory that labor is a chattel or commodity, 
has its true foundation therefore, not in the 
greater importance of its contribution to 
the joint operations, but in the strength of 
capital and the weakness of labor. The 
owner of capital may use it for productive 
purposes, or may withhold it indefinitely 
from such use, without suffering any physi- 
cal discomfort. The laborer, however, must 



100 OPERATIVE OWNERSHIP 

use his labor productively, and without loss 
of time, or he will suffer for want of the 
necessaries of life. But since, as we have 
seen, the laborer cannot work without tools 
and materials, which the capitalist controls, 
there is produced a situation in which the 
capitalist is enabled, by taking advantage 
of the necessities of the laborer, to force the 
latter to accept, instead of an equitable 
share in the product of their joint opera- 
tions, which is the natural recompense of 
his labor, a fixed wage, usually the lowest 
which he can be induced or forced to accept, 
while the capitalist appropriates the entire 
product. 

Not unresistingly, however, does labor 
submit to the hard conditions imposed upon 
it by capital, which it comes to regard with 
a feeling of hostility as its exploiter and 
oppressor; but carries on, through the 
power of organization, with every available 
weapon, an unremitting warfare, with the 
purpose of wresting from capital a larger 
and ever larger share of that wealth in the 
creation of which labor is a factor of at 
least equal importance to capital; while 
capital organizes to resist what it regards 
as the unreasonable demands of labor. 
What with labor organizing to lighten or 
to end the yoke of capital, and capital organ- 



OPERATIVE OWNERSHIP 101 

izing to perpetuate the yoke, the struggle, 
with its enormous economic loss, and the 
unutterable suffering, physical and mental, 
which it causes, seems likely to go on indefi- 
nitely, and with increasing bitterness until 
it ends in revolution or Socialism. 

HOW CLASS WARFARE MAY BE ENDED. 

In the industrial experiences of society 
two principles have been developed the gen- 
eral adoption and application of which to 
the prevailing industrial conditions would 
operate to place the industrial relations of 
society upon a basis of social justice, and 
avert the danger of revolution and the men- 
ace of socialism, to one or both of which the 
increasing bitterness of the class struggle 
inevitably tends. 

The first of these principles, considered 
with relation to the chronological order of 
their application, consists in the combining 
of the functions and the resources of capi- 
tal and labor, respectively, for industrial 
operations, not under conditions of sub- 
servience of one factor or group to the other, 
but on terms of equality, each recognizing 
the indispensability of the other, and each 
participating in the management of their 
joint operations, and sharing in the products 
of such operations on an equitable basis, 



102 OPERATIVE OWNERSHIP 

under a mutual arrangement whereby the 
labor group, besides participating in the 
management and in the profits, shall, in 
process of time and on certain agreed con- 
ditions, be admitted to participation, by 
purchase, in the ownership of the establish- 
ment in which they thus jointly carry on 
their operations. 

The second of these principles consists in 
the union in one and the same person or 
group of the functions of capitalist and 
laborer. 

The first above mentioned principle has 
been exemplified in a variety of schemes 
which are described in the literature of co- 
operation under the general appellation of 
Labor Co-partnership, and in some instances 
as profit-sharing. An illustration of the 
principles above mentioned, and of their 
practical application, in successive order, as 
profit-sharing, labor co-partnership and 
operative ownership, may be seen in the 
establishments known as the Maison Le- 
claire, of Paris, and the Familistere Society 
of Guise, a brief account of which was 
given in the preceding chapter. 

The schemes of the Maison Leclaire and 
of M; Godin, the founder of the Familistere 
Society, in their most important features, 
have been taken as models, with many varia- 



OPERATIVE OWNERSHIP 103 

tions as to matters of detail, by many other 
co-operative establishments which are still 
in successful operation. These establish- 
ments, like those above named, exemplify 
the successful application of the principles 
of participation in profits with capitalist 
ownership; participation in profits and 
management with joint ownership, and 
finally the union of the functions of capi- 
talist and workers in one and the same 
group, under complete Operative Owner- 
ship. 

But that phase of industrial development 
which exemplifies the principle of the union 
in one and the same person of the functions 
of capitalist and worker found its most com- 
plete and universal application in the indus- 
trial conditions which prevailed in the time 
prior to the invention of the steam-engine 
and the establishment of the factory sys- 
tem. A brief description of the then pre- 
vailing industrial methods, and of the con- 
dition of the laboring classes in that period, 
will serve to illustrate the advantages 
that may be expected to accrue to those 
classes from the adaptation of this prin- 
ciple to modern industrial conditions, in the 
form of group, or operative ownership. 



104 OPERATIVE OWNERSHIP 

PRE-CAPITALIST INDUSTRIES. 

In the time referred to, before the fac- 
tory system came into existence, every 
tradesman, after he had passed through 
the preparatory stages of his craft — those 
of apprentice and journeyman — owned his 
own shop, his own tools, and in most cases, 
his own raw materials. There was no wage 
question, for there was little or no wages 
to be paid. The apprentice not only re- 
ceived no pay, but he paid for the oppor- 
tunity to learn his trade. The journeyman, 
whose position was usually but a more ad- 
vanced stage of apprenticeship, received 
very meager wages in addition to his board 
and lodging; but out of such wages as he 
received he saved enough, in time, to pro- 
vide himself with the necessary tools with 
which to become a master-workman. For 
a workshop he used a part of his dwelling 
house, or an inexpensive outhouse in con- 
nection therewith. His stock of raw ma- 
terials rarely exceeded the needs of a few 
days' work, and involved no large outlay. 
Thus there was no chance for dispute be- 
tween capitalist and laborer, for the func- 
tions of capitalist and laborer were com- 
bined in one person. Every fully equipped 
tradesman was his own capitalist and his 
own laborer. 






OPERATIVE OWNERSHIP 105 

Speaking of the social conditions of the 
tradesmen of this period Mr. P. Gaskell, a 
writer who lived in the time before capi- 
talism had come to dominate entirely the 
field of productive industry, in his work en- 
titled "The Working Population of Eng- 
land, Its Moral, Social and Physical Condi- 
tions, and the Changes Which Have Arisen 
From the Use of Steam Machinery," pub- 
lished in London, 1833, says, in relation to 
the textile industry, which may perhaps be 
taken as typical of productive industry in 
general: 

"It may be termed the period of domestic 
manufacture; and the various mechanical 
contrivances were expressly framed for this 
purpose. The distaff, the spinning wheel, 
producing a single thread, and subsequently, 
the mule and jenny, were to be found form- 
ing a part of the complement of household 
furniture, in almost every house in the dis- 
trict where they were carried on, whilst the 
cottage everywhere resounded with the 
clack of the hand loom. 

"These were, undoubtedly, the golden 
times of manufacture. . . . It is true that 
the amount of labor gone through was 
small; that the quantity of cloth or yarn 
produced was but limited — for he worked 
by the rule of his strength and convenience. 



106 OPERATIVE OWNERSHIP 

They were, however, sufficient to clothe and 
feed himself and family decently, and ac- 
cording to their station; to lay by a penny 
for an evil day, and to enjoy those amuse- 
ments and bodily recreations then in being. 
He was a respectable member of society; a 
good father, a good husband and a good 
son." 

Well might the workingman of today, de- 
pendent, as we have seen in a former chap- 
ter, upon so many conditions over which he 
can exercise no control for the opportunity 
to use his strength and his skill in earning 
a livelihood, envy the capitalist-tradesman 
of earlier times the certainty of employ- 
ment; freedom from want or the danger of 
it, whether in youth or old age; the position 
of independence; the social respectability 
and the happy domestic environment, which 
were the possessions of the working class 
before the functions of capitalist and 
worker were separated and before the capi- 
talist arose as — no longer the worker, but 
the master of the worker; while the latter 
sank to the position of a servant, dependant 
for the opportunity to earn a livelihood 
upon the will of the capitalist. 



OPERATIVE OWNERSHIP 107 

ADAPTATION OF THE PRINCIPLE OF WORK- 
ERS' OWNERSHIP OF THE TOOLS TO 
MODERN CONDITIONS. 

It is not of course possible, nor, from the 
viewpoint of society at large, is it desirable, 
to restore the system of domestic manu- 
facture; yet the essential principle of that 
system — the principle of the combination 
of the functions of capitalist and laborer 
in one and the same person — may be re- 
stored by adapting it to the conditions of 
modern industry. 

Instead of the simple tools with which 
the tradesman of pre-capitalist times 
worked, and by the means of which a single 
tradesman, working with many tools, car- 
ried the process of production of a given 
commodity through all its stages, from the 
raw material to the finished product, we 
have in our modern manufactories, intri- 
cate and costly machinery, by means of 
which each man, and sometimes several men, 
perform only a single operation which is 
but a small part of the long and complicated 
process of manufacture. Production on a 
large scale is thus made not only possible, 
but for the sake of economy, necessary. The 
large amount of capital required for the 
purchase of costly machinery makes the 
ownership by each worker of the tool or ma- 
chine with which he works impossible. It 



108 OPERATIVE OWNERSHIP 

would, however, be easily possible for two 
or three or more persons who work with a 
single machine to own the machine jointly, 
and thus the principle of the ownership of 
the tool or machine with which men worked 
in the time referred to, would be applied, 
not indeed by each individual worker, but 
by the group. 

The same principle would be carried out 
in large establishments by all the operatives 
in each establishment forming themselves 
into a single group, owning collectively the 
entire establishment, including buildings, 
raw materials, machinery, finished product, 
and all other forms of capital employed in 
the business. Thus by the universal adop- 
tion of a system of group ownership instead 
of individual ownership, an ideal method of 
industrial production, regarded not alone 
from the viewpoint of the laborer but also 
from that of society in general, would be es- 
tablished, whereby the workers would be the 
sole owners of the tools as well as of all other 
forms of capital with which they operated ; 
the functions of capitalist and laborer would 
again be united; the social evils which arose 
from their separation would disappear, and 
the worker would again receive the whole 
produce of his labor. 



OPERATIVE OWNERSHIP 109 

DISTINGUISHED ADVOCATES OF THE PRINCIPLE. 

I lay no claim to originality in the advo- 
cacy of the principle of ownership in whole 
or in part by the workers in industrial 
establishments of the tools with which they 
work. It has been advocated by many emi- 
nent economists and publicists, including 
some of such high authority that their judg- 
ments, expressed in favor of any economic 
proposition, should insure for that propo- 
sition, the serious consideration of man- 
kind. 

John Stuart Mill in his Principles of Polit- 
ical Economy said: "The form of associa- 
tion, however, which, if mankind con- 
tinues to improve, must be expected in the 
end to predominate, is not that which can 
exist between a capitalist as chief and work 
people without a voice in the management, 
but the association of the laborers them- 
selves, on terms of equality, collectively 
owning the capital with which they carry 
on their operations, and working under 
managers elected and removable by them- 
selves."* 

Theodore Roosevelt has said again and 
again that the labor question, that is to say, 
the claim of the laborer to a just share of 



^Principles of Political Economy, by John Stuart Mill, 
Vol. 2, Ch. VII, Sec. 6. 



110 OPERATIVE OWNERSHIP 

the wealth which he creates, will never be 
settled until the laborer becomes the owner 
in whole or in part, of the tools with which 
he works. In his speech in Chicago at the 
first national convention of the Progressive 
Party, called in the newspaper reports of 
the proceedings, his "Confession of Faith," 
Mr. Roosevelt said: 

"Ultimately we desire to use the govern- 
ment to aid, as far as can safely be done, 
the industrial tool users to become in part 
tool owners, just as the farmers now are." 

Dr. John A. Ryan, a writer of note on 
sociological topics, in the course of his de- 
bate with the Socialist writer, Morris Hill- 
quit, in Everybody's Magazine in 1913, said: 
"Until the majority of the wage-earners 
become owners, at least in part, of the tools 
with which they work, the system of private 
capital will remain in Hilaire Belloc's 
phrase, 'essentially unstable'." 

OBSTACLES TO ITS ADOPTION. 

But how are the wage-earners to become 
the owners, even in part, of the tools with 
which they work? The tools of modern in- 
dustry — the machinery, materials and other 
forms of capital by means of which indus- 
trial operations on a large scale are carried 
on — are costly, and their acquisition would 



OPERATIVE OWNERSHIP 111 

require a large amount of capital which the 
workers do not possess. Moreover these 
tools are now owned by capitalists who, for 
the most part find them highly profitable 
investments, and would be unwilling to part 
with them to the workers if the latter were 
able to buy. 

While many economists and publicists 
have recognized that the true and final so- 
lution of the labor problem lies in the prin- 
ciple of the ownership by the workers of 
the tools with which they work, none, so far 
as I am aware, has suggested any practical 
plan by which that condition may be brought 
about The nearest approach to a sugges- 
tion of such a plan is that contained in the 
statement of Theodore Roosevelt quoted in 
the third preceding paragraph. 

But although he has not formulated any 
definite plan for its achievement, Mr. 
Roosevelt, in the short sentence above 
quoted, has suggested the means by which 
the prediction of John Stuart Mill in 
regard to collective ownership by the 
workers of the capital with which they 
carry on their operations, as quoted in 
an earlier paragraph of this chapter, 
may be realized. Let the government 
but aid the tool-users to become in part 
tool-owners, not by means of subsidies, or 



112 OPERATIVE OWNERSHIP 

any other form of gratuity, but by providing 
in the exercise of its sovereign functions of 
administering justice and promoting the 
general welfare, for an equitable adjust- 
ment of the relations between capital and 
labor, without allowing the strength of one 
side or the weakness of the other to affect 
the result, so that the workers shall receive 
a just share of the wealth which they 
create, while capitalists receive a fair re- 
turn for the use of their capital, and the 
tool-users themselves will be able in most 
cases, in time, to achieve complete owner- 
ship of those tools, without further aid from 
the government, and in a manner that will 
receive the entire approval of their non- 
working capitalist associates. How this 
may be done will be shown in a latter part 
of this chapter. For the comparatively 
small number of cases in which such ar- 
rangements cannot be effected another 
form of government aid will be suggested. 
The working classes have been advised, 
lectured and preached to for generations, 
about the beauties and benefits of economy, 
industry, thrift, diligence and a multiplicity 
of other social virtues, as a means of rising 
from the condition of wage-worker to that 
of wage-payer; or at least of gaining a suf- 
ficient competence to enable them to engage 



OPERATIVE OWNERSHIP 113 

in some independent business. With • the 
great majority of them, however, the cost 
of living approaches too close to their earn- 
ing capacity under the regime of wage-cap- 
italism to admit of any such accumulation 
of wealth as would enable them to rise 
above the position of wage-earner. 

Isolated cases may have occurred in 
which, through the intervention of some 
fortuitous event or circumstance, of which 
possibly the possession of a small amount 
of money, the fruit of years of indus- 
try and thrift, may have enabled some 
wage-earner to take advantage, and 
through which he may, in time, have 
risen to rank among the captains of 
industry. But in the vast majority of 
cases the wage-earner considers himself 
fortunate if with all the advantages that 
the practice of the virtues above mentioned 
can give he is able to keep a roof that he 
can call his own above his head, while rear- 
ing and educating a family. Even this is 
more than the average wage-earner is able 
to do. Save and economize as he may — and 
very many make the effort, as the very large 
accumulations in savings banks show — he 
will too often find, to his sorrow, that loss 
of employment, sickness, of himself or some 
member of his family, or some other reverse 



114 OPERATIVE OWNERSHIP 

of fortune, may dissipate in a few weeks 
the savings of years. 

GOVERNMENT AID. 

I have said above that if the government 
in the exercise of its sovereign prerogatives, 
should provide for an equitable adjustment 
of the relations between capital and labor, 
without allowing the strength of one side or 
the weakness of the other to affect the re- 
sult; in other words, if the capitalist and the 
workers should be compelled to adjust their 
industrial relations upon a basis of mutual 
equality, with justice rather than power as 
the arbiter in their negotiations, the result 
would be such that the tool-users them- 
selves, without further aid from the gov- 
ernment, would in most cases be able, in 
time, by the savings which such an adjust- 
ment would make possible, to achieve com- 
plete ownership of the tools (the machin- 
ery) which they use in their industrial 
operations. 

The reasons, as we have seen, why the 
tool-users cannot become even in part, tool 
owners are two-fold, viz. : because the pres- 
ent owners of those tools are unwilling to 
part with them, and because if they were 
willing, the tool-users have not the means, 
nor the opportunity, under the present 



OPERATIVE OWNERSHIP 115 

wage-system, of earning the means, with 
which to purchase them, or any substantial 
interest in them. To overcome these ob- 
stacles the owners must be induced, or in a 
certain sense compelled, to transfer (for 
full value) at least a substantial part in the 
ownership of those tools; and either the 
present wage-system must be so changed 
that the workers may receive a larger and 
more equitable share of the wealth which 
they produce, and be thereby enabled to ap- 
ply a portion of their earnings to the pur- 
chase of a share in those tools, or the capital 
required for such purchase must be sup- 
plied by some other means than the earn- 
ings of the workers. These things can only 
be done through the aid of the government. 

MANNER OF ITS USE. 

The ways and means by which the aid of 
the government may be used to enable the 
tool-users to become, at least in part, tool- 
owners will be discussed at length in the 
next following chapter. It is fitting, how- 
ever, that some explanation be given in this 
connection, of the plan in contemplation for 
that purpose. 

It is proposed that Congress shall enact, 
to apply to industrial establishments of na- 
tional consequence as concerning interstate 



116 OPERATIVE OWNERSHIP 

commerce, a law authorizing the operatives 
in any such establishment to organize them- 
selves into associations, in corporate form, 
with power to enter into arrangements with 
the owners of the establishment in which 
the members of such association are em- 
ployed, for joint operation of such estab- 
lishment by the capitalist owners and the 
operatives collectively, and joint participa- 
tion in the profits or losses thereof, and, for 
the right of purchase by the operatives, 
from time to time, or after an agreed num- 
ber of years, of a half interest in the estab- 
lishment. 

It is further proposed that the power of 
eminent domain shall be granted, under the 
law in question to the operatives' associa- 
tions, to the end that, should the owners of 
any such establishment refuse to enter into 
such arrangements with their operatives as 
would, in the opinion of the court or gov- 
ernmental department having jurisdiction 
of the matter, meet the requirements of so- 
cial justice, such association might, by ap- 
propriate legal proceedings and upon just 
compensation made, condemn and take over 
such establishment, substantially as may 
now be done by railway and other public or 
quasi-public corporations, where private 
property is required for the use of such cor- 



OPERATIVE OWNERSHIP 117 

porations. Where establishments should be 
thus taken over by the operatives it is pro- 
posed that the necessary capital be supplied 
to the operatives by the use of the govern- 
ment credit, somewhat after the manner in 
which the British government lent its credit 
to the tenant farmers of Ireland a few years 
ago, to enable them to purchase the lands 
which they formerly tilled as tenants, with 
the result that Ireland has been trans- 
formed from a pauperized, oppressed, tur- 
bulent and rebellious country, and is be- 
come, so far as agrarian conditions are con- 
cerned, a prosperous, peaceful and content- 
ed one. 

It may safely be assumed that the capital- 
ists would be comparatively few who would 
prefer expropriation, in the manner above 
explained, to remaining in business under 
conditions which, while conforming to the 
demands of social justice, should enable 
them to realize a good return for the use 
of their capital, and a reasonable compen- 
sation for their time and skill as managers, 
or in some other capacity, should they 
choose to so apply themselves. 

The use of government credit for the pur- 
pose above mentioned, therefore, would sel- 
dom be required, but when required would 
be granted under such safeguards as to 



118 OPERATIVE OWNERSHIP 

eliminate every practical possibility of loss 
to the government, from the use of its 
credit in the manner proposed, as we shall 
see in the next chapter. 

TRANSITION FROM CAPITALISM TO OPERATIVE 
OWNERSHIP. 

In those establishments whose owners 
should elect to enter into arrangements 
with their operatives for joint operation 
and ultimately joint ownership as above 
mentioned, the transition from the present 
system of wage-capitalism to that of com- 
plete Operative Ownership would be ac- 
complished in three successive stages, some- 
what after the plans of M. Leclaire and M. 
Godin described in the foregoing chapter, 
only two of which stages would be in any 
sense compulsory upon the capitalists — 
those of joint operation and joint owner- 
ship. The step from joint ownership to the 
third and final stage, that of complete Op- 
erative Ownership, could only be taken un- 
der the plan proposed, with the free and 
full consent of both capitalists and opera- 
tives, without which consent the relation of 
joint ownership would continue indefinitely. 

In the first stage of the transition the 
capitalists and operatives would continue to 
exist as separate groups, exercising their 



OPERATIVE OWNERSHIP 119 

respective functions in combination, not, as 
under the regime of wage-capitalism, with 
one group subservient to the other, but un- 
der arrangements entered into on terms 
of mutual equality, each group partici- 
pating in the operation and management 
of the establishment, and sharing in the 
profits in proportion to the current value of 
the thing which it contributed to the 
joint operations, namely, the use of capital 
by one group and the labor performed by 
the other. A definite proportion of the 
operatives' share of the profits would be re- 
served for accumulation in a fund to be 
maintained, among other purposes of mu- 
tual benefit, for the purchase, from time to 
time, or after a certain agreed period, of a 
substantial share, in the ownership of the 
establishment, the right to make such pur- 
chase being one of the terms of the arrange- 
ments above mentioned. 

In the second stage of the transition the 
operatives, having purchased a substantial 
share in the ownership of the establishment, 
would become joint owners with the non- 
working capitalists, and receive, in addition 
to the share in the profits which they re- 
ceived as workers, in the first stage, a fur- 
ther portion of the profits corresponding to 
the extent of their interest as owners. 



120 OPERATIVE OWNERSHIP 

This would leave the ownership of the es- 
tablishment in the hands of two classes of 
capitalists — working and non-working. The 
incentive of the working capitalists to own 
that portion of the capital held by the non- 
working capitalists being as we shall see in 
the next chapter, stronger than that of the 
non-working capitalists to retain it, the nat- 
ural result would be that the latter, in 
course of time, would be induced to sell their 
interest to the former, and the third stage 
of the transition, or complete Operative 
Ownership, would be realized. 

In all of the transitional stages above 
mentioned the evils of wage-capitalism 
would be eliminated; the workers would get 
their just share of the wealth which they 
created; and the capitalists, working and 
non-working, would receive a just return 
for the use of their capital and for the risk 
involved in its use, while both would share 
in the fruits of their joint success. 

In those establishments which had been 
taken over by the operatives under the 
power of eminent domain, and by the use 
of government credit, there would, of 
course, be no intermediate stages between 
wage-capitalism and complete Operative 
Ownership, for the latter system would be 
brought into operation at a single step ; the 



OPERATIVE OWNERSHIP 121 

tool-users would become tool-owners, and 
the laborer would possess the whole produce 
of his labor. 

The question has been asked if it would 
not be dangerous to thus suddenly entrust 
the complete control and management of 
large establishments to the operatives em- 
ployed therein, possessing neither manage- 
rial ability nor experience? 

If there is one thing which may be con- 
sidered as demonstrated by the financial 
and industrial experience of society during 
the past quarter of a century, it is that 
ownership and managerial ability as ap- 
plied in large enterprises, have no 
necessary relation one to the other. At 
the time of the last official census of the 
United States (1910) the amount of capital 
invested in all the railways of the country 
was approximately $18,000,000,000, a sum 
nearly equal to the value of all the manu- 
facturing industries of the country com- 
bined. Yet it is notorious that the actual 
management of these great industries is in 
the hands, not of their owners, but of 
salaried officials selected, not for any stock 
which they may hold in the industries 
which they manage, but for their man- 
agerial ability. And the same conditions 
exist in regard to the management of many 



122 OPERATIVE OWNERSHIP 

of the other great industries of the coun- 
try. They are managed by salaried men, 
not by their owners. 

In the case of many of the other great 
industries of the United States their own- 
ers or stockholders are scattered through- 
out the country and in many cases never 
see the property in which they are stock- 
holders. Yet that the properties are suc- 
cessfully managed the financial reports of 
the great metropolitan newspapers as well 
as those of the financial journals abundant- 
ly attest. 

To those, therefore, who would ask the 
question stated in the third preceding para- 
graph I would reply by asking what good 
reason can be given for supposing that 
stockholders scattered throughout the coun- 
try, who never see the property they own, 
and know little more about it than may be 
learned from the daily press or the financial 
journals, are better able to select compe- 
tent and successful managers than would 
be the men and women who spend their 
every working hour in the establishment, 
who see its every operation and can see 
when things are going well and when they 
are not? 



OPERATIVE OWNERSHIP 123 

JOINT OPERATION DISTINGUISHED FROM 
PROFIT-SHARING. 

It has happened on several occasions in 
the course of friendly conversations on the 
subject of Operative Ownership and the 
transitional stages of that system which I 
have designated as joint operation and joint 
ownership respectively, that when I thought 
I had made perfectly clear the nature of the 
system of Operative Ownership and of its 
transitional stages above explained, as well 
as the exact relations which would subsist 
between the capitalists and the workers or 
operatives in each stage, I have been met 
with a remark or a question from some of 
my hearers indicating their conception of 
the plan proposed to be that of a more or 
less modified form of the system of profit- 
sharing. I am admonished by this circum- 
stance that I cannot too strongly emphasize 
the distinction between these systems. 

The erroneous idea of similarity between 
Operative Ownership, in the stages men- 
tioned, and profit-sharing, arose, I think, 
from a misapprehension of the nature and 
effects of profit-sharing. 

Profit-sharing, in the sense in which that 
system is most generally exemplified, is the 
giving of a small percentage of the net 
profits of an establishment to the workers 



124 OPERATIVE OWNERSHIP 

therein, in addition to their ordinary wages, 
as an incentive to extraordinary care and 
diligence in their work. This share, except 
in the case of a comparatively few estab- 
lishments, is insignificant in amount, gen- 
erally Tanging from five to ten per cent of 
their ordinary wages, and representing but 
a part of the increased profits resulting 
from their increased efficiency produced 
by the hope of additional reward. But 
though the workers' share of the profits 
be small it serves the employer as an 
insurance against strikes and a weapon 
against organized labor, for it is either 
made a condition of participation in 
the profits that the workers shall not be- 
long to a labor union, or the privilege is 
given in such a manner as to produce a sense 
of obligation in the workers for the bene- 
fits received, which deters them from de- 
manding an increase in wages, or better 
hours or conditions of labor, which would 
often bring them more substantial benefits 
than would the small addition to their wages 
which their share in the profits would be. 
"As usually employed," writes one who is 
a prominent figure in the councils of organ- 
ized labor, in regard to profit-sharing, "it is 
a method for bribing the workman to re- 
main outside of the union of his craft, to 



OPERATIVE OWNERSHIP 125 

discourage demands for better wages, to 
stimulate output and increase profits for 
the employer, the workman to receive a 
small share of his increased earnings."* 

Between profit-sharing and those earlier 
stages of Operative Ownership which I have 
designated elsewhere in this book as joint 
operation and joint ownership, there is little 
or nothing in common. Under profit-shar- 
ing the worker has no voice in the manage- 
ment of the establishment in which he 
works; his share in the profits forms but a 
trivial addition to his wages, and is arbi- 
trarily fixed by the employer ; and he is de- 
prived of freedom of action in regard to 
associating himself with others of his craft 
for the purpose of advancing their common 
interests. 

Under Operative Ownership on the con- 
trary, even in its earlier stages, the workers 
are to have an effectual voice in the man- 
agement of the business, and receive an 
equitable share in the profits the extent of 
which is not determined by the arbitrary 
will of a capitalist employer. For there will 
be neither employer nor employee, under 
Operative Ownership, but the capitalist will 

*J. C. Skemp, Grand Secretary-Treasurer of Painters, 
Decorators and Paperhangers Union of America, as quoted 
in Profit-Sharing by American Employers, published by the 
National Civic Federation. 



126 OPERATIVE OWNERSHIP 

be the partner in a real sense, of the work- 
ers. Capitalist and workers alike will share 
in the profits in proportion to what they 
have respectively contributed to their pro- 
duction, and the workers will be free to as- 
sociate themselves with others of their 
craft as their interests or sympathies may 
prompt. 

The stages of joint operation and joint 
ownership are to be compared rather to the 
system of labor co-partnership described in 
the last preceding chapter, which they 
strongly resemble, with the added advan- 
tage in favor of the former that, even 
under labor copartnership the share 
of the profits which the workers re- 
ceive, or the extent of the interest 
which they may collectively or indi- 
vidually own in the establishment is arbi- 
trarily fixed by the capitalist employers in 
the first instance, while in the case of joint 
operation the workers' share in the profits 
is determined by the equitable rule of distri- 
bution in proportion to what they contrib- 
ute, as above stated, and the extent of the 
interest in the establishment which the 
workers collectively shall be entitled to ac- 
quire by purchase with their accumulated 
profits is a fundamental part of the scheme 
proposed. 



OPERATIVE OWNERSHIP 127 

In an article contributed to a pamphlet 
published by the National Civic Federation 
entitled "Profit-Sharing by American Em- 
ployers," (1916), by Mr. J. W. Sullivan, gen- 
eral lecturer for the American Federation 
of Labor, in which article the systems of 
profit-sharing and labor co-partnership are 
compared, and in which the former is se- 
verely condemned, that writer, quoting with 
approval from another, says in regard to 
labor copartnership : "Owning collect- 
ively the tools they use the workers 
gain the sense and dignity of possession." 
"Possession has a strong educative influ- 
ence; it lifts and elevates the mind of the 
employee, gives him a new interest in life, 
broadens his outlook on public affairs, 
strengthens his grit and character and 
makes him a better citizen." "Copartner- 
ship," writes Mr. Sullivan, further in the 
article referred to, "aims to absorb what 
share of industry it can through peaceful 
and legal measures — contract, compensa- 
tion, step by step education in business and 
co-operative methods. It seizes legitimate 
opportunity to place laborers with their own 
capital in the position now occupied by cap- 
italists and laborers." 



128 OPERATIVE OWNERSHIP 

All that has been said by Mr. Sullivan in 
regard to labor co-partnership may be as 
truly said of the more complete labor co- 
partnership of Operative Ownership. The 
error of conceiving joint operation or joint 
ownership as modified forms of profit-shar- 
ing, could not, therefore, arise in the mind 
of any one who was familiar with both sys- 
tems. 



CHAPTER IV. 

WAYS AND MEANS. 

RIGHTS OF PROPERTY SACRED. 

In the scheme proposed in this book for 
the establishment of Operative Ownership 
the rights of property of the capitalist own- 
ers of the means of industrial production 
will be regarded as sacred and inviolable. 
Those who maintain that the system of 
wage-capitalism, by which many or all of 
the great fortunes employed in industrial 
production were made, is robbery of the 
laboring classes, and that therefore those 
classes, could they get control of the ma- 
chinery of government, would be justified 
in confiscating the property thus employed, 
will find no aid nor comfort in the scheme 
herein proposed. The capitalist system may 
be altogether wrong. I believe I have shown 
in the preceding chapters that, in at least 
one of its phases, it is so; but its severest 
critic must, in fairness, admit that the ques- 
tion as to its justness or unjustness is con- 
sidered by very many enlightened persons 
to be at least a debatable one, while the 

129 



130 OPERATIVE OWNERSHIP 

preponderance of public opinion is upon the 
side of capitalism. 

The methods by which the capitalists' 
wealth was acquired were such as have re- 
ceived the sanction of law in every civilized 
land, from the birth of the capitalist sys- 
tem to the present time, during which time 
the highest ethical standards have prevailed 
to which the human race has yet attained. 

In the progress of time the moral stand- 
ards of society change. The thing which in 
one generation is regarded as entirely con- 
sistent with the highest moral standards 
may, by a later generation, be condemned 
as utterly wicked and depraved. A single 
instance, of the many which might be cited 
from history, will suffice to illustrate this 
truth. 

At the time of the establishment of the 
United States the institution of human 
slavery existed in many states, and was 
considered to be entirely consistent with the 
highest social, ethical and religious stand- 
ards. Scarcely half a century has passed 
since hundreds of thousands of men shed 
their blood to perpetuate it. And yet, to- 
day, hardly a man is to be found to speak 
a word in its favor, even among the sur- 
vivors or the descendants of those who 
fought to preserve it, 



WAYS AND MEANS 131 

VIEWS OF SOCIETY CHANGING. 

The views of society are changing today 
— they have been undergoing a change for 
years — on the subject of wage-capitalism. 
Multitudes of people have come, and other 
multitudes who have seriously studied and 
reflected on the subject are coming, to real- 
ize the injustice, as well as the inexpediency, 
regarded from the view point of public pol- 
icy, of a system which enables one numer- 
ically small class of society, through the 
power which the possession of wealth gives 
it, to impose poverty, misery, suffering and 
ofttimes death, upon another class, by ap- 
propriating to itself an undue share of that 
wealth which is the joint product of both 
classes, giving to the latter class a portion 
insufficient in most cases for its subsistence 
in a condition of decent living, and in very 
many cases insufficient for the preservation 
of life and health. 

We have seen in the preceding chapter 
that the ideal form of industrial production, 
having regard to its effect upon the social, 
physical and moral well-being of the work- 
ers, is that in which they own, individually 
or in group, the tools or machinery with 
which they work, and thus, combine in 
themselves the functions of capitalist and 
laborer, which combination of functions as 



132 OPERATIVE OWNERSHIP 

there explained, is the essential principle of 
the system of Operative Ownership. We 
have now to consider of ways and means by 
which the universal adoption of that system 
may be brought about. 

OBSTACLES TO OPERATIVE OWNERSHIP. 

At the outset we are confronted with two 
serious obstacles which must be met and 
overcome before the achievement of this 
purpose may be hoped for. These are: (1), 
the fact that nearly all industrial establish- 
ments are at present in the hands of capi- 
talist owners who have no disposition to 
part with them to their operatives, and (2), 
the further fact that if the capitalist owners 
were willing to transfer their establish- 
ments to their operatives at their full value, 
the latter have not the capital with which 
to purchase them. 

For the reason shown in the last preced- 
ing chapter, namely: the absence of any 
margin for possible savings under wage- 
capitalism between the earning capacity 
and the cost of living of the average work- 
ingman, it is hopeless to expect that, under 
that system of industry, the operatives, col- 
lectively, will ever be able, unaided, to buy 
out their capitalist employers. If, there- 
fore, Operative Ownership — that is to say, 



WAYS AND MEANS 133 

the ownership of the tools of industry by 
the tool-users — is ever to be realized, some 
other means than the savings of the opera- 
tives under the capitalist wage-system, must 
be found, to provide them with the neces- 
sary capital; and some means of compelling 
its adoption must be devised, rather than 
leave it to the choice of the employer to 
adopt it or not as he may see fit. 

EXAMPLES OF BENEVOLENT CAPITALISTS. 1 

Many cases may be found in the litera- 
ture of co-operation in which, through the 
benevolence or sense of justice of certain 
capitalist employers, their employees were 
given a substantial share in the profits of 
the employer's business, which, being al- 
lowed to accumulate, enabled the employees 
collectively, in course of time to buy out 
their employers, and establish the system of 
Operative Ownership in those particular es- 
tablishments. In one case, that of the 
Familistere Society of Guise, mentioned in 
a preceding chapter, all the profits of the 
business in excess of a moderate rate of in- 
terest or dividend on capital were annually 
given to the operatives and applied to the 
purchase of certificates representing an in- 
terest in the establishment, which in time 
resulted in the complete transfer of owner- 



134 OPERATIVE OWNERSHIP 

ship to the operatives. Many similar 
schemes have been adopted which in time 
developed into partial or complete Opera- 
tive Ownership. In all such cases the adop- 
tion of the co-operative plan was the volun- 
tary act of the capitalist employer. But ex- 
perience has shown that the ratio of em- 
ployers of this character to the total num- 
ber of employers is so small that it would 
require many generations for Operative 
Ownership to become universally adopted, 
if it depended on the voluntary acts of capi- 
talist employers. Such cases are valuable, 
however, as suggesting a means by which 
the industrial tool-users may, through 
their own industry become tool-owners, 
namely; by the successive stages of joint op- 
eration, joint ownership, and, finally, sole 
ownership, of the establishments in which 
they work, to be acquired by purchase with 
the savings which participation in the 
profits on an equitable basis enabled them 
to accumulate, as shown in the foregoing 
chapter. 

The means thus suggested however, re- 
quires for its successful application, that 
some plan be devised whereby, without vio- 
lating their legal or ethical rights of prop- 
erty or person, capitalists might be com- 
pelled to adopt, in their relations with their 



WAYS AND MEANS 135 

operatives, a system whereby, while them- 
selves receiving a just and reasonable re- 
turn for the use of their capital, labor would 
receive a living wage, and the profits in 
excess of these items would be equitably 
apportioned between the two. Thus with 
surplus earnings in excess of the bare ne- 
cessities of a decent living, the workers 
would be able to save a portion of such sur- 
plus earnings, by combining and systematic- 
ally accumulating which, they would, in 
process of time, be able collectively to pur- 
chase a part, and ultimately the whole, of 
the establishment in which they worked. 

Among the most important powers as 
well as the most imperative duties which 
appertain to the quality of sovereignty in 
any state or nation are those of administer- 
ing justice and of promoting the general 
welfare. In the exercise of these powers it 
is competent for the State to impose such 
restraints upon the use of property, and 
upon the right of contract in relation there- 
to, as justice or the general welfare shall 
require. This power extends even to the 
taking of private property, upon making 
full compensation therefor to the owner, 
when the general welfare requires such 
taking. The power when thus exercised is 
called the power of eminent domain, under 



136 OPERATIVE OWNERSHIP 

which title it will be further discussed in a 
later part of this chapter.* 

The quality of sovereignty involves the 
right, as against any power within the 
State, to exercise or to refrain from exer- 
cising any of its powers; and the right to 
refrain involves the right to impose terms, 
as an alternative to the exercise of such 
power, upon those who would directly profit 
by the non-exercise thereof. Thus, in the 
exercise of its sovereign powers, the State, 
in furtherance of justice and the general 
welfare, may authorize the taking over of 
all industrial establishments by the opera- 
tives therein, through the power of eminent 
domain, and with the aid of government 
credit; or it may provide that no establish- 
ment shall be thus taken over, the owner of 
which is willing to enter into arrangements 
with the operatives whereby such establish- 
ment may be operated upon terms con- 
sistent with social justice and the general 
welfare such as that the operatives shall 
have an effectual voice in the management 
of the establishment, an equitable share in 
the profits thereof, and the fight to pur- 
chase, from time to time or after a reason- 



*The taking of property under the power of eminent do- 
main, upon compensation made, is not to be confounded 
with its taking under the police power, without compensa- 
tion, which will be discussed in a later chapter. 



WAYS AND MEANS. 137 

able and definite term of years, an equal 
share with the capitalist share-holders, in 
the ownership of the establishment. 

Thus the condition whereby the tool-users 
were enabled in isolated cases, to become 
tool-owners through the sense of justice or 
the benevolence of capitalist employers, to 
which repeated references have been made 
in the foregoing pages, would be realized in 
course of time, in the great majority of in- 
dustrial establishments, by operation of law, 
where motives of justice or benevolence had 
failed to produce that result; while in the 
comparatively few cases, as we shall later 
see, in which the capitalists might be un- 
willing to enter into arrangements of the 
character mentioned in the foregoing para- 
graph, with the operatives, they might be 
subjected to compulsory sale of their estab- 
lishments to the operatives under the power 
of eminent domain, in which event the tool- 
users in such establishments would at once 
become tool owners. 

EMINENT DOMAIN. 

I have said in the beginning of this chap- 
ter that under the plan which I should pro- 
pose for the establishment of Operative 
Ownership the rights of property of capi- 
talist owners of industrial establishments 



138 OPERATIVE OWNERSHIP 

should be held sacred and inviolable. But 
to many the plan of involuntary expropria- 
tion through the power of eminent domain 
suggested in the last preceding paragraph, 
will seem at variance with that statement. 
A true understanding of the nature of the 
power of eminent domain, and of the limita- 
tions which that power places upon the 
rights of private property, will show that 
the taking of property by virtue of that 
power involves no such violation, for as 
against the power of eminent domain, no 
rights of private property exist. It is de- 
sirable therefore that the nature of this 
power, which as an attribute of sovereignty 
takes precedence of all private rights, may 
be clearly understood. 

Eminent domain is that power, inherent 
in every sovereign, by which private prop- 
erty may be taken for public use upon mak- 
ing full compensation therefor to the own- 
er. A familiar example of the exercise of 
this power is seen in the taking of property, 
by condemnation, for railway purposes. 
Other examples of the exercise of that pow- 
er are the taking of land for use as a high- 
way, or for streets, parks, public buildings 
and the like. In every such case the right 
of the State, or its lawfully delegated agen- 
cies, to take property is absolute, and the 



WAYS AND MEANS 139 

only conditions precedent to the taking are 
the judicial ascertainment of the value and 
its payment. 

While this power may not ordinarily be 
used to compel the transfer of property 
from one person or group to another, it 
may be so used when such transfer is re- 
quired in furtherance of some general plan 
designed by the legislative power to pro- 
mote the general welfare. 

Eminent domain is defined by Justice 
CooJey, the eminent American jurist and 
law writer, to be "that superior right of 
property pertaining to the sovereignty, by 
which the private property acquired by its 
citizens under its protection may be taken, 
or its use controlled, for the public benefit, 
without regard to the wishes of the own- 
ers/'* "Title to property," says the same 
author, "is always held upon the implied 
condition that it must be surrendered to the 
government, either in whole or in part, when 
the public necessities, evidenced according 
to the forms of law, demand."** 

EMINENT DOMAIN AN OPTION OF PURCHASE. 

Thus it will be seen that the right of emi- 
nent domain is, in effect, an option of pur- 



*Constitutional Limitations, p. 524. 

**Ibid, quoting People v. Mayor, etc., 32 Barb. 112. 



140 OPERATIVE OWNERSHIP 

chase upon every dollar's worth of private 
property in the country, which option may 
be exercised whenever the public good re- 
quires it. This power may be delegated by 
law to any agency or corporate body to 
which the legislative body, in the exercise 
of its constitutional powers, may see fit to 
delegate it, whether it be a municipal cor- 
poration, a railway corporation, or an in- 
corporated association of operatives, as the 
public interests may, in the opinion of the 
legislative body, require. 

Nor can the owner of property so taken 
justly complain if the government, or its 
delegated representatives, see fit, on proper 
and lawful occasion, to exercise the power 
or option so reserved or delegated, since 
such owner is presumed to have acquired 
and accepted the property in question with 
full knowledge of the right of the govern- 
ment to take it, in the event, and upon the 
condition, above stated. 

Should the sovereign people, therefore, 
through their legally constituted govern- 
mental agencies, believing the system pro- 
posed in this book as a substitute for wage- 
capitalism to be conducive to justice and the 
general welfare, see fit to lend their aid by 
the use of their credit, and by the exercise 
or delegation of the right of eminent do- 



WAYS AND MEANS 141 

main, in establishing that system, they 
would be well within the limits of their 
legitimate powers in so doing. 

EMINENT DOMAIN AND GOVERNMENT CREDIT. 

While, as we have seen, it is improbable 
that any considerable proportion of capital- 
ists would elect to allow themselves to be 
subjected to expropriation in preference to 
entering into arrangements of the character 
already described with the workers, it is 
probable that some would so elect; and 
whilst their number might be few in com- 
parison with those who would be willing to 
enter into the arrangements mentioned, 
they might in the aggregate represent a 
very large amount of capital. To ask the 
government to assume the risk involved in 
aiding the operatives, by the use of its 
credit, to obtain the capital which would be 
required to compensate the capitalist own- 
ers, whose property would be thus taken 
through the power of eminent domain, is a 
matter requiring the most serious consider- 
ation. In this spirit the question will be 
treated in the following pages, and I believe 
that I shall be able to show that the risk in- 
volved to the government will be insignifi- 
cant, while the benefits to be gained, not 
alone by the comparatively small num- 



142 OPERATIVE OWNERSHIP 

ber of operatives who would be direct 
beneficiaries of the government aid, in cases 
of expropriation, but also by the vastly 
greater number who as the result of a law 
being in existence authorizing such expro- 
piration, would be admitted, on a basis of 
substantial justice as between capitalist and 
worker to participation with their former 
employers in the management and the prof- 
its of the establishments in which they 
work ; and that, in addition to the benefits to 
be gained by the workers, the benefits that 
would accrue to society in general, through 
the cessation of class warfare ; the general 
diffusion of wealth; the increased regard 
for the rights of property ; and in many oth- 
er ways, would be incalculable. Next to 
securing to its people the blessings of lib- 
erty, there is no other way in which the re- 
sources of a nation could be better em- 
ployed than in the establishment of justice 
and the promotion of domestic peace and 
tranquility, in industrial no less than in po- 
litical, relations ; and what other industrial 
system can so powerfully contribute to the 
establishment of industrial peace on a last- 
ing foundation as one in which the opera- 
tives are at once capitalists and workers, 
and in which there are no masters and no 
servants?, 



WAYS AND MEANS 143 

If, by what has been said in the foregoing 
pages, the importance and desirability of 
such a system as a substitute for that of 
wage-capitalism, and the necessity of gov- 
ernment aid in bringing it into operation, 
have been made clear to the reader, which 
I make bold to assume, it is fitting that we 
next proceed to consider the manner in 
which the government aid may be made 
available, together with the question of the 
feasibility of such aid in the light of prec- 
edents in the use of government credit, and 
of government subsidies in aid of private 
enterprises, for the sake of the public bene- 
fits expected to be gained from such enter- 
prises. 

It is obvious from what has been already 
stated, that in order to authorize the use of 
government credit and the power of emi- 
nent domain in aid of the operatives, some 
appropriate action would have to be taken 
by the law-making body of the state or na- 
tion desiring to adopt and put into opera- 
tion the scheme herein proposed for the 
achievement of Operative Ownership. Such 
legislative action should take the form of a 
law authorizing the incorporation of asso- 
ciations of operatives for the purpose of 
taking over from the owners, by purchase 
or condemnation, the establishments in 



144 OPERATIVE OWNERSHIP 

which they are employed; or of collectively 
entering into arrangements with such own- 
ers for joint operation of such establish- 
ments. Such associations should be given 
the power of eminent domain, and all other 
powers, consistent with the public interests, 
necessary to effectuate the objects of their 
organization. They should have power to 
issue bonds for the purpose of paying for 
the property to be taken over, and should be 
required to maintain a sinking fund with 
which to meet the bonds at maturity. For 
the payment of the bonds so issued the gov- 
ernment would pledge its credit, in some 
appropriate form ; having first caused to be 
made a rigid examination into the condi- 
tion of the establishment to be taken over, 
and found it to be prosperous, somewhat 
after the manner in which banking or un- 
derwriting concerns investigate properties 
which they expect to finance, by bond issue 
or otherwise. 

To safeguard the government against 
loss by the occasional failure of an es- 
tablishment the bonds of which had 
been thus guaranteed, an indemnity fund 
should be provided to be maintained by as- 
sessment of every guaranteed establishment 
in proportion to the amount of guaranteed 
bonds in force against it, the rate of such 



WAYS AND MEANS 145 

assessment to be based upon the known ra- 
tio of business failures in the industry to 
which such establishment belonged. 
Through such a fund each establishment 
would virtually and at its own expense, 
carry insurance in favor of the government, 
against the possibility of failure, just as it 
carries insurance against loss by fire. Nor 
would the maintenance of such a fund in- 
volve any burden to the establishments 
maintaining it, for the low rate of interest 
at which government-secured bonds could 
be marketed would more than offset the cost 
of maintaining the fund in question. 

The more effectually to conserve the in- 
terest of the government it would probably 
be expedient to establish a government bu- 
reau or department, or a branch of some 
existing department, to have charge of all 
matters relating to Operative Ownership 
where the government credit was involved, 
which department should maintain a thor- 
ough system of inspection with regard to 
the financial and industrial conditions exist- 
ing in every establishment thus aided, some- 
what after the manner in which state and 
national banks are inspected. Such depart- 
ment should also have power by some ap- 
propriate means, to exercise, whenever it 
might be necessary, an effectual check upon 



146 OPERATIVE OWNERSHIP 

any mismanagement of such establishment, 
and, in extreme cases, to take temporary 
possession and assume management of the 
same, somewhat after the manner of re- 
ceivers appointed by courts of equity. 

EXAMPLES OF GOVERNMENT AID. 

In the idea of government aid to private- 
ly owned enterprizes, given with a view to 
gaining some public benefit, there is nothing 
new or novel. The practice is centuries old. 
It has at various times, in different coun- 
tries, taken a diversity of forms, such as 
subsidies on shipping; bounties on exports; 
protective duties on imports; monopolies; 
grants of money or land; and, in some in- 
stances, the public credit. 

Perhaps the most interesting, and in con- 
nection with our present subject, the most 
suggestive instance that could be mentioned 
of state aid to private industry, given with 
the design to achieve a public benefit, is that 
of the Irish Land Purchase Acts, to which 
reference was made in the foregoing chap- 
ter. These were a series of acts passed 
by the British Parliament at various times 
between the years 1885 and 1909, inclusive, 
providing for the raising of money by the 
use of government credit to enable the ten- 
ant farmers of Ireland, which included prac- 



WAYS AND MEANS 147 

tically the entire farming population of the 
island, to buy at a fair valuation, the land 
they formerly tilled as tenants, at oppres- 
sive and ruinous rents. This aid was given 
in the form of guaranteed land stock, bear- 
ing dividends of two and three-fourths per 
cent, to which was added an additional one- 
half per cent for the sinking fund which 
will ultimately wipe out the debt. One of 
the series of land acts above mentioned — 
that of 1903, provided $800,000,000 for the 
benefit of the Irish tenantry in addition to 
some $200,000,000 which had been made 
available for that purpose by previous acts ; 
making a total of one thousand millions of 
dollars for which the credit of the British 
government was pledged for the purpose 
above stated. As a result of these acts, al- 
though less than thirteen years have elapsed 
since the most important act, that of 1903, 
was passed, upwards of 550,000 tenant 
farmers have been made the owners of the 
lands they cultivate, which compose much 
the greater part of the entire tillable area 
of the island; and the process is still going 
on with the practical certainty of the com- 
plete! abolition of landlordism in Ireland 
within a few years, when every farmer will 
own the land he cultivates. 



148 OPERATIVE OWNERSHIP 

IRELAND BEFORE THE LAND PURCHASE ACTS 
AND AFTER. 

Prior to the passage of the Land Purchase 
Acts practically all of the land of Ireland 
was owned by a landlord class who, for the 
most part, lived in England or on the Euro- 
pean continent, where they squandered in 
luxury the money wrested from the tenants 
by the most cruel system of rack-renting 
that could be employed; so that the great 
majority of the population, in years of the 
most bountiful harvests, were scarcely able 
to eke out a miserable existence with what 
remained after the demands of the land- 
lords were satisfied, while a partial failure 
of crops, as often happened, was followed 
by suffering and often by famine, so that 
thousands died of starvation. 

In the early Ws of the last century, fol- 
lowing one of the recurrent visitations of 
famine, an agitation sprung up in Ireland 
for the betterment of the condition of the 
tenantry, and was carried on with such 
vigor that the country was brought almost ■ 
to the verge of civil war. From this agita- 
tion, in large measure, resulted the Land 
Purchase Acts. 

In 1909 Mr. Hugh Sutherland, Associate 
Editor of the Philadelphia North American, 
visited Ireland for the purpose of studying 



WAYS AND MEANS 149 

the conditions there under the operation of 
the Land Acts, with a view to publishing his 
observations in the form of a series of let- 
ters to that journal These letters have 
since been published in book form, and 
would be interesting reading to any one who 
might desire to investigate the result of the 
change from landlordism, which is land cap- 
italism, to peasant proprietorship, which is 
Operative Ownership applied to land, A 
sentence or two which I shall quote from 
Mr. Sutherland's book will enable the read- 
er to form some idea of the results that have 
been realized in Ireland through the prin- 
ciple of Operative Ownership thus applied. 

"I have traveled," writes Mr. Sutherland, 
"for days and days over the countryside 
which I traversed seven years ago, and have 
seen peace and plenty where I saw misery 
and despair. The face of the land has in- 
deed changed, for there are happy homes 
and gardens where cattle grazed, and in- 
dustry and contentment where hopeless 
poverty held its ghastly sway."* 

To the lover of social justice who reads 
Mr. Sutherland's description of the scenes 
above referred to, and of which what I have 
quoted only affords the merest glance, the 



^Ireland Yesterday and Today, by Hugh Sutherland, p. 
126. 



150 OPERATIVE OWNERSHIP 

thought will naturally occur; if the same 
thing could be done for industrial labor 
throughout the world that has been done 
for farm labor in Ireland by the means de- 
scribed — that of employing the government 
credit to help the producer to become the 
owner of the means of production, what a 
blessing it would be to society. 

LAND CAPITALISM AND INDUSTRIAL 
CAPITALISM. 

But why should it not be done? Univer- 
sally evils of like nature yield to like reme- 
dies. The trouble is essentially the same 
in both cases — the land capitalist and the 
industrial capitalist, both non-producers, 
both owning and not using the means of 
production, but subsisting on the labor of 
those who do use them. The basis of the 
claim of the two kinds of capitalists to the 
produce of labor in their respective indus- 
tries, is the same, viz.: the ownership of 
the things that labor works with in the pro- 
duction of wealth — land in the one case, ma- 
chinery in the other. With so many fea- 
tures in common between the two forms of 
capitalism, the conclusion seems irresistible 
that the remedy which proved to be prac- 
ticable and efficacious in the one case would 
be equally so in the other — the principle 



WAYS AND MEANS 151 

of Operative Ownership applied by the aid 
of government credit. 

GOVERNMENT AID IN THE UNITED STATES. 

In the minds of American readers in par- 
ticular, if they are familiar with the com- 
mercial and financial history of their coun- 
try, the idea of government aid, whether in 
the form of credit, subsidies, import duties, 
or otherwise, to privately owned enterprises 
for the sake of the public benefits to be de- 
rived therefrom, should excite neither sur- 
prise nor alarm. No single subject has been 
so much discussed among the people during 
the past fifty years as, for instance, that of 
the protective tariff, which means an in- 
direct tax laid upon the people, of every 
class, in the form of duties upon imports, 
with the avowed purpose of aiding those 
engaged in industrial production to the end 
that, protected against the competition of 
foreign manufactures — the products of 
cheaper labor, with lower standards of liv- 
ing — American industries might grow and 
multiply, and the nation, as a whole, be 
thereby benefited. How fully this object 
has been realized the marvelous growth of 
the nation, in wealth, in population, and in 
all the essentials of a nation's commercial 
and industrial greatness, abundantly at- 



152 OPERATIVE OWNERSHIP 

tests. The nation has in this way paid an 
enormous sum of money to build up its in- 
dustries. The amount paid indirectly by 
the American people in the form of import 
duties, in furtherance of the protective 
tariff policy since the close of the civil war 
would more than build and equip every 
tariff-protected mill, factory and workshop 
in the United States; and yet the people 
seem very well satisfied with their bargain ; 
for though they may from time to time re- 
lax the rigor with which they adhere to the 
policy of protection, they evince no disposi- 
tion to depart from it. 

The enormous subsidies in the form of 
land grants given to the railroads at various 
times present other instances of govern- 
ment aid to privately-owned enterprises 
with a view to gaining a public benefit. It 
is fashionable in these times, to denounce as 
wanton extravagance, or worse, the grant- 
ing of these subsidies, and in view of the 
great value to which such lands have risen, 
it would seem, looking at the grants in ques- 
tion from the view point of the present, that 
such criticisms were not unjust. But those 
who were in control of the government 
when those land grants were made could not 
see them from the view point of the present. 
To them the land seemed to possess a poten- 



WAYS AND MEANS 153 

tial value, which could only be realized by 
means of the railroads. That that view was 
sound must be apparent when we reflect 
that then, as now, private capital could not 
otherwise be found f oi> investment in a rail- 
way through a wilderness, with no near 
prospect of realizing a reasonable dividend 
on its investment The land grants resulted 
in the rapid settlement of the territory tra- 
versed by the railways; and millions of 
farms and homes are now to be seen where 
formerly the wilderness spread for thou- 
sands of square miles. Year after year that 
erstwhile wilderness adds to the nation's 
wealth a sum that may be reckoned in hun- 
dreds of millions, and to the world's food 
supply, in excess of the nation's own needs, 
enough to feed a considerable portion of the 
population of Europe. Compared to results 
like these the question whether or not, in 
some remote time in the future, the wilder- 
ness would not have been settled anyway; 
or whether or not a better bargain might 
have been driven with the railway promo- 
ters, and a lesser quantity of land have suf- 
ficed to procure the building of the rail- 
ways, is of very little importance. The les- 
son afforded by the story of the land grants 
lies in the fact that the grants were made to 
privately owned enterprises in the expecta- 



154 OPERATIVE OWNERSHIP 

tion of realizing a public benefit; and that 
that benefit was realized beyond the most 
sanguine hopes of those governmental agen- 
cies through which the grants were made. 

In some cases in the United States the 
government aid to privately owned enter- 
prises for public benefit took the form, in 
whole or in part, of government credit. 
Thus, in addition to grants of lands made 
by the government to the Union Pacific Rail- 
way Company in 1862, the government of 
the United States pledged its credit on the 
bonds of that company to the extent, on an 
average, of $25,000 per mile of railway to 
be built— considerably more than one-half 
the cost of construction and equipment. In 
consequence of this obligation the govern- 
ment paid out at various times something 
over $100,000,000, every dollar of which was 
afterwards recovered with interest. Thus 
in the class of cases last mentioned, the pub- 
lic benefits derived from the enterprises in 
question are due in part to this pledging of 
government credit, and the expected public 
benefits were realized without loss to the 
government. 

Similar instances of government aid 
granted in the form of subsidies of land, 
bounties on exports or duties on imports; 
pledges of government credit; and such like 



WAYS AND MEANS 155 

benefits, in many different countries, to pri- 
vately owned enterprises, for the sake of 
the public benefit to be derived from the 
enterprises thereby aided, and which have 
nearly always resulted in the attainment of 
the public benefit desired, might be multi- 
plied indefinitely. 

EXAMPLE OF INDEMNITY TO GOVERNMENT IN 
GUARANTY OF BANK DEPOSITS. 

In this connection mention may appropri- 
ately be made of the scheme for guarantee- 
ing bank deposits recently proposed and in 
part carried out in the United States. 

Following the financial panic of 1907, 
William J. Bryan, one of the leading pub- 
licists and statesmen in the United States 
and recently Secretary of State in the cabi- 
net of President Wilson, proposed, and 
strongly advocated in The Commoner, a 
weekly journal then owned and edited by 
him, that, to prevent a recurrence of such 
panics, which nearly always occur through 
sudden and generally groundless fears on 
the part of depositors in banks, the repay- 
ment of deposits in National banks should 
be guaranteed by the government, and that 
a fund be established by means of a small 
assessment against each bank, based upon 
the amount of its average deposits, out of 



156 OPERATIVE OWNERSHIP 

which fund depositors should be paid, 
promptly and in full, in the event of failure 
of any such bank. Largely through Mr. 
Bryan's influence the plan was adopted and 
incorporated into the national Democratic 
platform of 1908, and at the presidential 
election of that year 6,393,000 voters gave 
it their approval. The Democratic party 
was defeated, however, and with it, for the 
time being, the plan of government guar- 
anty of bank deposits. The plan, was, how- 
ever, adopted and enacted into law by the 
States of Kansas, Oklahoma, Nebraska, 
Texas and South Dakota, and it is now in 
successful operation in four of those states. 
In South Dakota the law was so framed that 
the bankers are not compelled to operate 
under it, and they have not done so. That 
the plan is not a partisan one is evidenced 
by the fact that of the states above named 
as having adopted it, two are Democratic 
and three Republican. 

In proof of the success of the system of 
guaranty of bank deposits the following 
quotation is made from a letter by George 
H. Shibley, Director of the American Bu- 
reau of Political Research, transmitting to 
the United States Senate Sub-committee on 
Guaranty of Bank Deposits a brief history 
of the system in the states above mentioned. 



WAYS AND MEANS 157 

Commenting on the results of the system 
Mr. Shibley says: 

"This record shows that not only are the 
people of these states greatly pleased with 
the new departure — a total absence of per- 
sonal loss from closed banks — but also that 
the banks themselves that have been guar- 
anteeing bank deposits have profited by 
the system, owing to the advantages secured 
by the increase in the volume of their de- 
posits, and other benefits. This is of vast 
importance, demonstrating that the system 
as a whole is a complete success." 

Not one dollar has any one of the states 
which have adopted this system been called 
upon to pay out of its own revenue, nor is 
it even remotely probable that they ever 
will be, for they are amply protected against 
possible loss by the guaranty fund before 
mentioned. 

SAFETY THROUGH INDEMNITY FUND. 

The scheme of government guaranty of 
bank deposits is of interest in this connec- 
tion not alone as affording a recent instance 
of the use of the government credit for the 
direct benefit of one class of the community 
with a view to securing indirectly a benefit 
to the whole community, but also for the 
unique feature of an indemnity fund, main- 



158 OPERATIVE OWNERSHIP 

tained at the expense of the class receiving 
the benefit of the government credit, and 
having the effect of making the government 
secure against any practical possibility of 
loss by failure of any such establishment. 
The same feature, as stated in an earlier 
paragraph of this chapter, has been adopted 
as a part of the plan herein proposed for 
the use of government credit in aid of 
Operative Ownership; and there is no rea- 
son to doubt that it will produce the same 
result, of protecting the government against 
loss, as in the case of guaranty of bank de- 
posits in the states above mentioned. 

Although the adoption of the system of 
guaranty of bank deposits would involve 
the government credit to a vastly greater 
extent than would the scheme herein pro- 
posed for the establishment of Operative 
Ownership, it will readily be seen that the 
latter would be immeasurably more bene- 
ficial and far-reaching in its results, since 
it would effect a complete transformation 
of the social and economic status of the 
wage-earning classes, which constitute so 
large and important a part of the popula- 
tion, changing them from the condition of 
servants or employees of capitalists, to that 
of free and independent workers and own- 



WAYS AND MEANS 159 

ers of the capital, in the form of machinery 
and materials with which they worked. 

If we roughly estimate the wage-earning 
population, including under that head brain- 
workers as well as hand-workers, employed 
in the various industries to which the 
scheme herein proposed may be applied, in 
the United States, at 15,000,000, or approxi- 
mately one-half of the total wage-earning 
population ; and if we estimate the number 
of persons dependent upon each wage-earn- 
er as three, including the wage-earner him- 
self, a very conservative estimate, we have 
a total of 45,000,000 persons who would be 
directly affected by the system of Operative 
Ownership. If to this number there be ad- 
ded those engaged in mercantile, profes- 
sional and such like occupations, who de- 
pend in very large measure upon the wage 
earning classes for their subsistence, and 
who with their dependents may be roughly 
estimated at an additional 10,000,000, we 
shall have considerably more than one-half 
of the population of the country who would 
be more or less directly and beneficially af- 
fected by the change which Operative Own- 
ership would make in the social status of 
the working classes. So inter-related are 
the various classes that compose society in 
the mass, that whatever affects so large a 



160 OPERATIVE OWNERSHIP 

proportion of the population advantageous- 
ly, cannot but affect practically all the rest 
in the same manner, in varying degrees. 

When so large a part of the population of 
the country are directly concerned; and 
when the beneficial results, which are rea- 
sonably certain to flow from the general 
adoption of the system of Operative Owner- 
ship, affect this part so vitally, it would 
seem that the pledging of the government 
credit under safeguards which amount to 
an insurance against loss, and which in 
effect is only a pledging of the credit of all 
the people, upon good security, for the di- 
rect benefit of half the people, and the in- 
direct benefit of the other half, would be 
a very small price to pay for such great 
benefits. 

LITTLE RISK AND GREAT BENEFITS. 

But even if we may suppose that the gov- 
ernment were not fully protected against 
loss in the relatively small number of cases 
(as we shall presently see) in which it would 
be necessary to resort to the use of govern- 
ment credit; and if we assume that the 
same percentage of failures should continue 
to occur in the guaranteed establishments 
which now annually occur in manufactur- 
ing establishments generally of the class 



WAYS AND MEANS 161 

which would be considered acceptable risks 
by the government (and which failures may 
be roughly estimated as involving one-half 
of one per cent of the capital represented in 
all such establishments), the loss which the 
government would thereby sustain would be 
an insignificant price to pay for the benefits 
to be derived to society, by ending the war 
of the classes and by the establishment of 
the industrial relations of the nation upon 
a permanent basis of social justice, to say 
nothing of the special benefits to be realized 
from the establishment of such a system, 
by the laboring classes for whose direct 
benefit the government has hitherto done 
practically nothing. 

CONSIDER THE WORKINGMAN. 

The people have been taxed enormously 
in the form of protective tariff duties, and 
capitalist manufacturers have heaped up 
prodigious fortunes as one of the results. 
The national and state governments pay 
out, year after year, millions upon millions 
of dollars for the establishment and main- 
tenance of agricultural colleges, agricultural 
experiment stations, and agricultural what- 
nots, and the agricultural classes have 
waxed rich as the result, in part, of such 
governmental aids. Doctors, lawyers, edu- 



162 OPERATIVE OWNERSHIP 

cators, engineers, and other professional 
gentlemen, are educated in state universi- 
ties maintained at public expense ; but noth- 
ing is done — that involves any outlay of 
money by the government — for the labor- 
ing classes. Laws and regulations have been 
passed, it is true, affecting the conditions of 
labor and the relations between the laborer 
and his employer; but these are cheap in 
the sense that they cost the government 
nothing, for the cost is borne by the em- 
ployer. 

The man who started as a tariff protected 
manufacturer a generation ago, in a small 
way, if qualified for his chosen vocation, 
and if he has met with average success, has 
lived well, and has retired, or is able to re- 
tire, in opulence. The man who started a 
generation ago, in a small way, as a tariff- 
protected farmer, if he has attended with 
reasonable industry and diligence to his bus- 
iness, and has met with average success, has 
lived well and has retired, or is able to re- 
tire, in comfort and affluence, and to trans- 
mit to his children a comfortable fortune. 
But the man who started a generation ago 
as a tradesman, or as a mill or factory oper- 
ative, however skillful and industrious he 
may have been, is still a tradesman or a mill 
or factory operative; and if he has had but 



WAYS AND MEANS 163 

average success, he has not lived well, but 
has had a constant struggle with poverty, 
privation, want, often hunger, always un- 
certainty, and often worry as to his next 
month's or next year's subsistence, and is 
ready to retire, if indeed he has not already 
retired, a useless, broken down, decrepit old 
man, dependent on the filial duty of his chil- 
dren — if happily he has any children who 
recognize the duty — or is fit only for the 
poorhouse or the grave. 

I said, in the last paragraph but two, that 
the government has done nothing that in- 
volves an outlay of money for the benefit 
of the laboring classes, but that is not 
strictly correct. It has provided soup-houses 
and bread lines for their times of unemploy- 
ment; and for the old age of every worker 
who needs it — and very many do — it has 
provided a very imposing poorhouse, and 
a very hospitable grave — in the potter's 
field. 

It is not contemplated that the govern- 
ment would lend its credit for the taking 
over by the operatives of any establishment 
unless, after a rigid investigation such as 
would be made today by a banking house 
or underwriting syndicate, preparatory to 
the flotation of a bond issue, such establish- 
ment was found to be in a prosperous con- 



164 OPERATIVE OWNERSHIP 

dition, and reasonably certain of so contin- 
uing. The same conditions which would 
make such an establishment acceptable to 
the government for the purpose above men- 
tioned would also make it desirable to the 
owners to retain, even on condition of con- 
senting to an arrangement for joint opera- 
tion, and ultimate joint ownership, with 
the operatives. It is therefore practi- 
cally certain that the number of capital- 
ists who would suffer themselves to be 
expropriated rather than submit to such an 
arrangement would be very small. It may 
well be believed that a capitalist compelled 
to choose between giving up a profitable 
business which will yield good returns for 
his capital, with a liberal salary for his 
skill as manager, should he choose to act 
in such capacity, and the alternative of en- 
tering into such arrangements as above pro- 
posed, would not hesitate to choose that al- 
ternative. 

GOVERNMENT CREDIT TO BE SELDOM USED. 

In the expropriation of the landlords of 
Ireland by the aid of government credit, un- 
der the Land Purchase Acts, which has been 
mentioned in the foregoing pages, there 
was made available for the benefit of the 
Irish tenantry, a total of approximately one 



WAYS AND MEANS 165 

billion dollars. The land, primarily, and af- 
ter that, all the fiscal resources of Ireland, 
were made security against loss to the 
United Kingdom, whose parliament passed 
the acts in question. This would make a 
per capita liability for the whole population 
of Ireland of approximately $250. 

It is improbable that the capitalists in the 
United States who would choose expropria- 
tion rather than joint operation, under the 
plan herein proposed would represent, in 
the aggregate of capital involved, more 
than the amount which was made available 
to the Irish tenants as above stated; for 
in their case there was no alternative plan 
of joint operation and joint ownership pos- 
sible. The landlord must either sell the land 
or hold it, taking the chance, in the latter 
event, of compulsory sale on less favorable 
terms at some future time. If we assume 
that the capitalists who might prefer expro- 
priation would represent the aggregate 
amount of capital above stated, it would 
make a per capita liability of only $10.00 for 
the total population of the United States. 

The total amount of capital employed in 
the United States in its three leading 
branches of industry, manufacturing, min- 
ing and railway transportation, according 
to estimates based upon census reports for 



166 OPERATIVE OWNERSHIP 

the year 1910 and other official sources, was 
approximately $40,000,000,000. If from this 
total we deduct one-fourth, as covering the 
capital invested in enterprises which, for 
various reasons, such as smallness of estab- 
lishments, unsatisfactory financial condi- 
tion, or the satisfactory nature of the re- 
lations already existing between capital and 
labor in such establishments, would not 
come within the operation of the plan pro- 
posed, there would remain a total of 
$30,000,000,000, employed in establishments 
the operatives in which might be desirous 
of coming, and eligible to come, under the 
operation of the plan proposed. In order 
that the aggregate amount to which gov- 
ernment credit would be used might amount 
to the sum above mentioned, of $1,000,000,- 
000, or $10.00 per capita of the population, 
there would have to be one concern in ev- 
ery thirty of those in a sound financial con- 
dition and doing a profitable business, who 
would prefer going out of business, and 
turning it over to the operatives, rather 
than enter into arrangements with the lat- 
ter for joint operation and ultimately joint 
ownership, as herein proposed. 

It is not reasonably supposable that so 
large a proportion of capitalists, who as a 
class have a very high appreciation of the 



WAYS AND MEANS 167 

earning power of capital, and of an oppor- 
tunity for its safe and profitable invest- 
ment, would be willing to put themselves 
in a class with the proverbial individual who 
"cut off his nose to spite his face." Yet if 
we suppose that so large a proportion of 
capitalists as above stated were willing to 
enter the class of the spiteful party above 
mentioned, and if we further suppose the 
per capita liability above mentioned, to 
eventuate in a total loss, instead of the 
mere shadowy possibility of loss that it 
really would be, it would still be an insig- 
nificant price to pay for the benefits which 
would result, directly to a very large per- 
centage of the population, and indirectly 
to the State and to society in general. 

AN EQUITABLE BASIS OF DIVISION. 

Frequent use has been made in the fore- 
going pages of the term "equitable basis" 
and others of like import, in speaking of an 
apportionment, between capitalists and op- 
eratives, of the profits of their joint opera- 
tions, and the question has doubtless arisen 
in the mind of the reader: what would be 
considered an "equitable basis" for such an 
apportionment? As the same term will be 
used again and again, it is desirable that 
it be clearly understood. 



168 OPERATIVE OWNERSHIP 

At first blush the question, what is an 
equitable division of products or profits, 
would seem to be a perplexing one. It will 
not prove so, however, if we approach its 
consideration with the idea of power, as a 
factor in its determination, banished from 
our minds; so that we may regard both the 
capitalists and the operatives as equally 
free and independent parties, mutually 
agreeing to combine their resources of cap- 
ital and labor power respectively, in pro- 
ductive operations. Under such an arrange- 
ment it would seem but natural justice that 
each should share in the profits of their 
joint operations in proportion to the value 
of the thing which each had contributed 
towards its production. An illustration may 
serve to make this idea more clear. 

Suppose A to be the owner of a city lot 
which lies idle and profitless because he has 
not the means with which to build on it. 
B has a sum of money which lies idle for 
lack of an opportunity to invest it. A and 
B mutually agree to build a house on A's 
lot with B's money, and do so accordingly. 
The transaction is not regarded as a sale 
on the one side nor a loan on the other, but 
as a joint investment. Now the property 
is rented and A and B come to divide the 
first year's income. The value of A's lot 



WAYS AND MEANS 169 

was $3,000; the cost of the building for 
which B furnished the money was $5,000. 
The income to be divided amounted to $800. 
The value of A's lot being three-eighths of 
the total cost of house and lot, and the 
amount of money contributed by B being 
five-eighths of the total cost, it is obvious 
that both should share in the profits or in- 
come in the same proportions, that is to 
say: A should receive three-eighths and 
B five-eighths of the income, or $300 and 
$500, respectively. 

Let us apply the same method of division 
to an arrangement for joint operation such 
as has been suggested between capitalists 
and operatives. Suppose the owner of a 
manufacturing plant with an investment of 
$500,000, employing 200 operatives, has en- 
tered into an agreement with the latter 
somewhat as above outlined in the case of 
A and B, and that at the end of the fiscal 
year it is found after paying all operating 
expenses, including depreciation of plant, 
wages of operatives to the amount of 
$100,000, and interest on capital at six 
per cent., $30,000, there would remain as 
net profits $120,000, which is to be divided 
between the capitalist and the operatives. 

Many will say, that under the rule that 
each must participate in the profits in pro- 



170 OPERATIVE OWNERSHIP 

portion to the value of what they have re- 
spectively contributed, and the owner hav- 
ing contributed his capital of $500,000, and 
the operatives $100,000 in wages, which con- 
tributions, added together would make 
$600,000, the owner should receive five- 
sixths of the profits and the operatives one- 
sixth. Certain profit-sharing concerns ac- 
tually divide their profits on that basis, be- 
lieving it to be a just ratio, but it is funda- 
mentally wrong. 

The error in the computation lies in the 
assumption that the owner has contributed 
his capital, whereas, in reality, he has only 
contributed the use of his capital. The sub- 
stance of it remains intact. His plant, stock 
m trade, etc., are unimpaired, for the wear 
and tear of the plant are covered by the 
items of repairs, depreciation, etc., and any 
diminution of stock is represented in the 
item of profits. The old adage that one 
"cannot have his loaf and eat it, too" is 
and will always be, true ; whence it follows 
that if the owner has his loaf at the end 
of the year it is certain it has not been 
eaten; that is to say, if he has his plant 
and his stock in trade intact, at the end of 
the year, it is certain they have not gone 
into the year's business. 

Not so, however, as to the labor of the 



WAYS AND MEANS 171 

operatives. That has been expended and is 
irretrievably gone. A definite part of the 
span of life that remained to each oper- 
ative at the beginning of the year has gone 
into, and is materialized in, the product 
of the industrial operations. What part, 
he may not know — but that it is gone ad- 
mits of no doubt; and, unlike the capital 
of the owner, does not remain unimpaired 
at the end of the year. 

The true basis of computation in such 
a case as that above supposed would seem 
to be, for the capitalist the current rate of 
interest at the time and place of the trans- 
action, as the value of the use of the cap- 
ital contributed by him, and for the oper- 
atives the current rate of wages, as the 
value of the labor contributed by them, the 
profits in excess of these items to be divided 
between the capitalist and the operatives 
in the proportion which the value of the 
use of the capital would bear to the value 
of the labor expended. It has, however, been 
urged that the rate of interest paid for 
money loaned upon good security is not a 
true measure of the value of the use of 
money invested in industrial production, 
since in the latter form of investment there 
is no security against loss, the danger of 
which is affected by many factors not 



172 OPERATIVE OWNERSHIP 

within the control of the capitalist, and the 
risk of which varies in different lines of 
business. 

It must be admitted that where the dan- 
ger of loss is greater in a given industry 
than when money is loaned upon good 
security, the rate of interest should be 
enough higher to cover the additional 
risk; and as there is no certain rule by 
which the element of risk may be accurate- 
ly measured, the rate to be paid to the cap- 
italist as the value of the use of his cap- 
ital, before the profits could be divided, 
would be a matter of mutual agreement 
in each case. 

The correct apportionment of the profits 
in the case above supposed would require, 
on the assumed basis, that the capitalist who 
has contributed the use of his capital, worth 
thirty thousand dollars, or 23 per cent, of 
the combined contributions of capital and 
labor, should receive 23 per cent, of the 
profits in addition to interest ; and that la- 
bor, whose contribution was 77 per cent, 
of the combined contributions, should re- 
ceive 77 per cent, of the profits, in addition 
to wages. 

It is conceivable that in some years, ow- 
ing to certain extraordinary conditions of 
the market for certain commodities, or of 



WAYS AND MEANS 173 

business generally, there might be no profits 
to divide after allowing the agreed rate 
of interest to the capitalist and the current 
rate of wages to the operatives; on the 
contrary, it is possible that in such condi- 
tions of the market or of business a loss 
might result. In such event the loss should 
be borne by both parties jointly, and in 
the same proportion that they would have 
participated in the profits. It would be most 
unjust to require the capitalist to bear all 
the loss, if the business were unsuccessful, 
but only to receive a part of the profits if 
it were successful. 

In the principle that capital and labor 
should share in the products or profits of 
their joint operations in proportion to the 
value of what each has contributed thereto, 
we have a standard based upon absolute 
justice, by which the share of each in the 
joint product may be determined with an 
approach to mathematical accuracy. The 
value of the use of capital, the current rate 
of interest at a given time and place, is 
almost as easily ascertainable as is the mar- 
ket price of wheat. The value of labor, the 
prevailing standard rate of wages in a 
given locality for any trade or class of la- 
bor, is almost as easily ascertained. From 
these data the share of each is a matter 



174 OPERATIVE OWNERSHIP 

of easy computation, with little room for 
disagreement or dispute. 

In the principle that capital and labor 
should share equally in the management of 
their joint enterprise, and in the profits in 
proportion to what each has contributed to 
their production, while the losses, if losses 
result, should be borne in the same propor- 
tion, we have all the elements of a true 
copartnership — joint control, joint profits 
and joint losses — and that would be the true 
character of the relations between capital- 
ists and operatives in the first stage of the 
system proposed — that of joint operation. 

From what has been shown in the fore- 
going pages of this chapter, I believe it 
may fairly be concluded: (1) that the ex- 
ercise of the power of eminent domain, in 
the manner and for the purpose contem- 
plated, involves no violation of the rights 
of private property; (2) that the use of 
government credit, in the manner proposed, 
involves no practical possibility of loss to 
the government, and is altogether feasible ; 
and (3) that with the government aid made 
available for the benefit of industrial work- 
ers in the manner above explained, its ac- 
tual use would be seldom required, for the 
great bulk of capitalist employers would 
gladly enter into arrangements with their 



WAYS AND MEANS 175 

operatives for joint operation of their es- 
tablishments, upon an equitable basis, in 
preference to going out of business alto- 
gether. 

INTRODUCING THE SYSTEM. 

There remains, therefore, to be explained 
the contemplated plan for the introduction 
of the proposed system of participation, to 
which frequent reference has been made in 
the foregoing pages, by means of which the 
industrial tool-users may hope to become, 
first copartners with the capitalist owners, 
then joint owners, and ultimately sole own- 
ers, of the means of industrial production. 

Assuming that a law had been enacted 
authorizing the formation of associations 
of operatives, in corporate form, with the 
powers and for the purposes already ex- 
plained, the first step to be taken by the 
operatives in any establishment desiring to 
avail themselves of the benefits of the law, 
would be to organize themselves into a cor- 
porate body, in such manner as the law 
should provide. 

Corporate organization being effected, 
the Operatives' Association would submit to 
the employers a proposition for joint oper- 
ation by the owners and themselves, pro- 
viding for joint participation in the man- 



176 OPERATIVE OWNERSHIP 

agement upon a stipulated basis of repre- 
sentation; joint participation in the profits 
upon an equitable basis of division as be- 
tween the employers and the operatives, 
and the right of the operatives collectively 
to purchase from time to time, or at an 
agreed time in the future, at a stipulated 
price or upon a definite basis of valuation, 
a half interest in the establishment. Should 
the employers refuse to consider any such 
proposition, the operatives would have re- 
course to eminent domain to take over the 
establishment in the manner already ex- 
plained. But should the employer be willing 
to enter into the arrangements proposed, 
or into negotiations for more satisfactory 
arrangements, such negotiations might be 
carried on either directly between the par- 
ties in interest, or through the mediation, 
and with the aid of, the government depart- 
ment or agency having such matters in 
charge. Should the negotiations fail 
through the refusal of the employers to 
agree to terms which, in the opinion of 
the government department or agency 
above mentioned, were just and reasonable, 
resort might be had to eminent domain, as 
in the case of the employers' refusal to con- 
sider any proposition in the first instance. 
But should the negotiations fail through un- 



WAYS AND MEANS 177 

reasonable demands on the part of the op- 
eratives, the further aid of the government 
would be denied them. 

If the proposition submitted to the em- 
ployers by the operatives should be accept- 
able; or if a mutually acceptable proposi- 
tion should be agreed upon through nego- 
tiations, which proposition in either event, 
complied with the requirements of the law, 
a contract embodying such proposition 
would be formally entered into and would 
be thereafter binding upon both parties 
thereto. 

CONSERVING THE PUBLIC INTERESTS. 

Only the advancement of the public in- 
terests would warrant the government in 
placing at the service of the operatives the 
extraordinary powers involved in the plan 
under consideration. But these interests 
would be but slightly subserved if the onlx 
result of the arrangements above proposed, 
between employers and operatives, were a 
larger income for the operatives, in such 
form that it might all be immediately ex- 
pended by them in gratifying the desire 
for better living in the present, without pro- 
vision for the future; leaving them, in many 
cases, a prey to their own improvidence, 
and a possible burden to the public, if later 



178 OPERATIVE OWNERSHIP 

they should be overtaken by the calamities 
of unemployment, sickness or a dependent 
old age. In lending its aid to the establish- 
ment of the relations between capitalists 
and operatives herein proposed, the objects 
which might be supposed to be in contem- 
plation by the government would be, not 
alone the immediate improvement in the 
standard of living of the operatives, but 
also the guarding of them, in the future, 
against the sufferings incidental to unem- 
ployment, sickness, or infirmity, and of re- 
lieving the public from the burden of caring 
for them in such sufferings ; the gratifying 
of the workers' natural and laudable aspir- 
ation for industrial self-government; and 
the scarcely less important advantage to so- 
ciety, of the more general diffusion of 
wealth, which the general adoption of Oper- 
ative Ownership, in whole or in part, would 
involve. 

To secure these advantages and insure 
that the objects of the government should 
not be defeated, it would be advisable that 
the law in question should provide, as a con- 
dition of the right of the operatives in any 
establishment to organize in corporate 
form, and to avail themselves of its pro- 
visions, that such organizations should pro- 
vide in their charter or articles of associa- 



WAYS AND MEANS 179 

tion, that a definite portion, not less than 
one-half, of the share of the profits earned 
by the operatives, in excess of ordinary 
wages, should be paid to the association 
for their use, and should be placed in a 
common fund or funds for the purpose of 
providing the means of payment for the 
interest in the establishment which, under 
the agreement before mentioned, must be 
transferred to the operatives collectively, 
from time to time, or after a definite period, 
and for various other purposes of mutual 
benefit. 

A JOINT OPERATIVE BOARD. 

For the successful working out of the plan 
in contemplation for joint operation, the 
agreement entered into between the own- 
ers' corporation and that of the operatives 
should provide, among other things, for a 
Joint Operative Board in which owners and 
operatives should be equally represented, 
and of which board the President of the 
owners' corporation might be ex-officio 
President; that such board should have 
complete control through a General Man- 
ager whom it should select, of all the busi- 
ness of the establishment; and that the 
net proceeds of the business, after allow- 
ing the current standard rate of wages 



180 OPERATIVE OWNERSHIP 

to the operatives for their labor and the 
current or agreed rate of interest to the 
owners for the use of their capital, should 
be divided between the owners' corporation 
and that of the operatives, in proportion to 
the value of what each had contributed to 
the joint operations; that is to say: the 
value of the use of the capital as measured 
by the current rate of interest, or fixed by 
mutual agreement, on the one side, and the 
value of the labor, as measured by the cur- 
rent standard rate of wages, or fixed by 
mutual agreement, on the other. 

We may further suppose that such an 
agreement would provide for the payment 
of the operatives' wages* directly to each 

*In the foregoing pages of this chapter the term wages 
has been used as expressing the sums of money advanced 
to the operatives from time to time, weekly, bi-weekly or 
monthly, the same as if they were working for an employer 
instead of for themselves and their co-partners. In this sense 
the term is inaccurate, and is used only for want of a more 
exact term. Wages, as that term is ordinarily used and 
understood, is the recompense paid by an employer to an 
employee for labor performed by the latter. The term, there- 
fore, implies the existence of the relation of employer and 
employee. But that relation is incompatible with that of 
co-partnership, which is the real relation which would exist 
between capitalists and operatives in the plan herein 
described. In the ordinary business co-partnerships with 
which we are familiar, it is not unusual for each partner 
or certain partners to withdraw, from time to time, as may 
be required, stated sums of money to meet their living ex- 
penses ; but such sums are not, and cannot properly be called 
wages, since the relation of employer and employee does not 
exist. 

With this explanation, therefore, I shall continue to use 
the term wages in the convenient, if inaccurate, manner above 
described. 



WAYS AND MEANS 181 

operative, at stated intervals — weekly, bi- 
weekly, or monthly — according to the cus- 
tom of the industry, or as might be agreed 
upon; and annually or at shorter intervals 
if so agreed, a division of the profits might 
be made, between owners and operatives, 
when each operative would receive one-half 
of his share and the other half would be 
paid into the treasury of the Operatives' As- 
sociation, and placed to his credit. 

OPERATIVES AS JOINT OWNERS. 

At the end of the period designated in 
the arrangements to be entered into be- 
tween capitalist and operatives, as above 
explained, after which the operatives 
should be entitled to purchase a half 
interest in the establishment, or sooner, if 
a gradual system of purchase had been 
provided for in such arrangements, and 
when the operatives should have made such 
purchase, they should become joint own- 
ers as well as operatives. And since under 
the law of their organization they would 
continue to maintain a fund for the 
further purchase of shares, as well as 
for other purposes, the operatives would 
gradually come to own more and more of 
the stock of the establishment. This result 
would be the more certain because the oper- 
atives would have a double incentive to ac- 



182 OPERATIVE OWNERSHIP 

quire such shares. They would have the 
same incentive that the non-operative share 
holders would have — that of a profitable in- 
vestment — and the further and stronger 
incentive of the natural desire of workers 
to own the tools and materials with which 
and upon which, they work. 

OPERATIVES AS SOLE OWNERS. 

The operatives having, therefore, strong- 
er reasons for acquiring the remaining 
shares than the non-operative owners would 
have for retaining them, the natural result 
would be that the operatives would buy the 
outstanding shares as rapidly as their in- 
creasing means and the willingness of the 
non-working capitalists to sell, would per- 
mit. With increased resources, as they 
should have after becoming joint owners of 
the establishments in which they worked, 
and which resources would increase more 
and more with each new acquisition of 
shares in the establishment, the operat- 
ives would acquire the second half of the 
shares in a much shorter space of time than 
was required for the acquisition of the first 
half. 

As between the individual operatives and 
the Operatives' Association an account 
would, of course, be kept, showing the value 



WAYS AND MEANS 183 

of each operative's share in the assets of 
the Association at any time. In the event 
of the withdrawal — voluntary or otherwise 
— of any operative from the establishment, 
which would mean also withdrawal from 
the Association; or in the event of the 
death of any operative, such operative, or 
his legal representatives in case of his 
death, would be entitled to withdraw his in- 
terest in the Association, in such manner as 
should be provided in the by-laws of the As- 
sociation. 

Thus, while enjoying from the beginning 
of their arrangements under the plan pro- 
posed, larger incomes, steady employment, 
better conditions of work, a higher standard 
of living, and industrial peace and inde- 
pendence, the operatives would gradually 
but surely, and by their own industry, be- 
come sole owners of the means of produc- 
tion. The industrial tool-users would have 
become tool-owners, and to the laborer 
alone would belong the whole produce of 
his labor. 

LEGISLATION NOT INDISPENSABLE. 

From what has been said in the foregoing 
pages of this chapter in regard to the neces- 
sity of legislation to authorize the use of 



184 OPERATIVE OWNERSHIP 

govenment credit and the power of emi- 
nent domain for the taking over of industri- 
al establishments by the operatives therein, 
where the capitalist owners were unwilling 
to enter into arrangements for join opera- 
tion and joint participation in the products 
according to the requirements of social 
justice, it is not to be understood that such 
arrangements may not be entered into vol- 
untarily, between the owners and the oper- 
atives in any such establishment, without 
legislation. On the contrary, such arrange- 
ments may be entered into freely by mutual 
agreement between capitalists and workers, 
and there are many establishments now in 
existence in which such arrangements have 
been put into operation, in various forms, 
on the initiative of the owners, prompted 
by a sense of justice, which arrangements, 
in most cases, have been found to harmonize 
with the financial interests of the capital- 
ists. 

In the following chapters I shall endeavor 
to show that some such arrangements 
whether effected by the voluntary acts of 
employers or by legislative aid, are not only 
advisable for the promotion of justice as 
between capitalist and laborer, but are con- 
ducive to the financial benefit of capitalists 
as a class, and will be productive of such 



WAYS AND MEANS 185 

relations between capital and labor as are 
urgently demanded, if a safeguard is to be 
found against the encroachments of govern- 
ment upon the traditional rights of private 
property and private industry, and if the 
further spread of the Socialistic spirit 
which inspires such encroachments is to be 
arrested. 



CHAPTER V. 

BENEFITS OF OPERATIVE OWNER- 
SHIP. 

ALL CLASSES OF SOCIETY BENEFITED. 

The benefits to be derived from Operative 
Ownership, and in a lesser degree, from the 
transitional stages of joint operation and 
joint ownership, through which, as we saw 
in the last preceding chapter, Operative 
Ownership may be achieved, are manifold, 
and extend to all classes of society. Para- 
doxical as it may seem, the capitalist 
employer who would be compelled in the 
manner already explained to enter into 
arrangements with his operatives for joint 
operation and ultimately joint ownership 
of the establishment in which they work, if 
he chose to continue in business rather than 
suffer expropriation, would be by no means 
the least benefited of those who would 
profit by the change. 

We have seen in a previous chapter the 
hostility with which workers in many 
industrial establishments regard their 
employers. It needs no argument to con- 

186 



OPERATIVE OWNERSHIP 187 

vince any reasonable mind that such a state 
of feeling, known, as it doubtless generally 
is, to the employer, cannot but have a dis- 
turbing, and often a distressing effect upon 
the mind of the latter. Mr. James Na- 
smyth, a master-engineer of some promi- 
nence in England, about fifty years ago, 
gave expression to the state of feeling of 
many employers of labor when he said, in 
his evidence before the Royal Commission 
on Trade Unions, that he had retired from 
business ten years earlier than he would 
otherwise have done, such was the irrita- 
tion of having to "walk on the surface of 
this continually threatening trade union 
volcano that was likely to burst out at any 
moment."* 

BENEFITS TO THE EMPLOYER. 

The position of the capitalist employer 
who finds himself thus walking on the sur- 
face of a volcano, despised and hated by 
employees who feel no interest in his busi- 
ness other than that of getting the greatest 
amount of wages for the least amount of 
work, and who care nothing whether the 
employer's profits are great or small so 
long as they get their wages, would seem to 



♦Report of Royal Commission on Trade Unions, cited in 
Co-partnership in Industry, by C. R. Fay, p. 11. 



188 OPERATIVE OWNERSHIP 

present a sad contrast to that of the capi- 
talist who, by meeting the just demands 
and reasonable aspirations of labor by an 
equitable division of profits and a voice in 
the management of their joint operations, 
surrounds himself with workers who, while 
combining their labor with his capital, re- 
gard him as their leader and friend; and 
who, from their regard for him as well as 
from their own direct interest in the profits 
of the establishment, bring to their work the 
highest degree of care and efficiency of 
which they are capable. It may well be be- 
lieved that the peace of mind, and the sense 
of personal and financial security which the 
capitalist thus situated enjoys is worth all 
that the workers would receive as their 
share of the profits in excess of wages, with- 
out reckoning any countervailing financial 
advantages to be gained by the capitalist 
through the greater care and efficiency of 
the workers. 

But there would be countervailing ad- 
vantages of a financial character which 
would accrue to the capitalist from the in- 
creased care and efficiency which the work- 
ers, under the system of joint operation, 
would bring to their work. Speaking of M. 
Leclaire, who has been called the father of 
profit-sharing, and whose experience in 



OPERATIVE OWNERSHIP 189 

that regard has been described and com- 
mended by John Stuart Mill in his Prin- 
ciples of Political Economy, M. Chevalier, a 
French writer on Economics, and a con- 
temporary of M. Leclaire, said in regard 
to the latter's experience as related by him- 
self, that "the increased zeal of the work 
people continued to be a full compensation 
to him, even in a pecuniary sense, for the 
share of profits which he renounced in their 
favor."* 

The literature of co-operation is full of 
cases which bear witness to the fact that 
the sacrifices which capitalist employers 
have made, by sharing liberally the profits 
of their businesses with their employees, 
have been more than repaid through the in- 
creased efficiency of the workers, besides 
which, moral benefits of incalculable value 
have been realized, both by capitalists and 
laborers. Upon this subject I shall have 
more to say in a later part of this chap- 
ter, under the sub-title of "Increased 
Efficiency Under Profit-Sharing." 

A SAFEGUARD AGAINST GOVERNMENTAL 
INTERFERENCE. 

But more important than all other ma- 



*Quoted in Principles of Political Economy, by John 
Stuart Mill, Book IV., Ch. VII., Sec. 5. 



190 OPERATIVE OWNERSHIP 

terial advantages to be gained by the in- 
dustrial capitalist through the means of 
participation and joint ownership, is the 
security which the general adoption of these 
measures will give; as against the danger 
of Socialism, which, as we saw in an earlier 
chapter, is a real and imminent danger 
threatening the very existence of the pres- 
ent social order; and the more immediately 
imminent and almost palpable danger of 
government regulation of all industry, ex- 
tending even to the regulation of wages and 
of prices. 

Industrial capitalists are either blind to 
the significance of events which are of daily 
occurrence around them, or are possessed 
of the wisdom of the ostrich, which is said 
to hide its head in the desert sands when 
danger threatens, if they fail to realize and 
to forestall the momentous changes in the 
industrial relations of society which nearly 
all well informed observers can clearly dis- 
cern as almost certain to occur in the near 
future — which are, indeed, beginning to oc- 
cur already. 

These changes are coming through gov- 
ernmental regulation of private industry. 
A beginning only has been made in the rail- 
way industry, wherein regulative laws pre- 
scribe among other details of management, 



OPERATIVE OWNERSHIP 191 

the number of cars which may be hauled in 
a train, and the number of men to be em- 
ployed in handling it; and wherein also 
government commissions, state and nation- 
al, fix the rates which railways may charge 
for the services which they render. Among 
the disastrous results of this regulation — 
this crushing between the upper and the 
nether millstones — may be mentioned the 
facts that on an actual capital conservative- 
ly estimated at $18,000,000,000 to $20,000,- 
000,000, and by some as high as $22,000,000,- 
000, the net operating income of all the rail- 
ways in the United States amounted, in 
1914, to a little less than 4 per cent on the 
lowest estimate above stated,* and that at 
this moment (June, 1916) one-sixth of all 
the railway property in the United States 
is in the hands of receivers. 

What is happening to the railways and 
other public utilities today in the matter of 
regulation of prices, will happen to manu- 
facturers tomorrow. As pointed out by 
Mr. Walter Lippmann, the brilliant young 
author of Drift and Mastery, there is a 
"consciousness" growing up that is likely 
to be more troublesome to the manufacturer 
than the "class-consciousness" of labor of 



*Railway Statistics of the United States for the year end- 
ing June 30, 1914, by Slason Thompson. 



192 OPERATIVE OWNERSHIP 

which so much has been written. Mr. Lipp- 
mann calls it "consumers'-conseiousness," 
and he shows that it is a power which the 
great industries will have to reckon with. 
He further shows that with the coming of 
"votes for women" this power will increase 
enormously, for it is the women who do the 
shopping and who feel most directly the ef- 
fect of the high cost of living; and it will 
be through their influence that, by govern- 
mental regulation, there will be imposed 
upon business a maximum of quality and a 
minimum of cost.* 

If industrial capitalists would avert from 
themselves the fate that has come to the 
railways, through the tyranny of the ma- 
jority finding expression through govern- 
mental regulation, they must place them- 
selves in a position to control governmental 
activities, in a rightful and legitimate man- 
ner, through the ballot. To this end they 
must associate themselves with labor, with 
its great voting power so closely that the 
interests of the worker and those of the 
capitalist will be identical in character, if 
different in degree. Experience has proven 
that this identity of interest is not realized 
through the wage system. It can only be 



*Drift and Mastery, by Walter Lippman, pp. 72, 73. 



OPERATIVE OWNERSHIP 193 

realized either through a real partnership 
between capitalist and laborer, as in joint 
operation or joint ownership, as described 
in an earlier chapter, or by the physical 
identity of capitalist and laborer, as in the 
case of complete Operative Ownership. 
There is no danger that the number of men 
to be employed in operating a threshing ma- 
chine nor the price at which the farmer 
must sell his wheat, his beef or his milk, 
will ever be fixed by law, because the farm- 
ers are strong in voting power, and would 
quickly defeat any political organization 
that would attempt to trench upon their 
legitimate rights of property. And the 
same power, the same security, and the 
same immunity from undue governmental 
interference, would appertain to industrial 
capital under the system of joint op- 
eration and joint ownership, as proposed 
in the foregoing chapter. I shall have oc- 
casion to refer further to voting power as 
a means of conserving the legitimate rights 
of property, in a later chapter. 

If the operatives are not to be allowed to 
participate in the management of industry, 
the time will come when the State will par- 
ticipate in its management and will itself 
determine the extent of the participation. 

If industrial operatives are not to receive 



194 OPERATIVE OWNERSHIP 

an equitable share of the produce of their 
labor, there will come a time, as in the case 
of the railways, when wage regulation and 
price regulation will leave but small profits 
for the owners to divide. 

The prevention of these conditions through 
the power which capital allied with labor, in 
the manner before described, would be able 
to exert upon government, would more than 
compensate for any sacrifice of profits, 
through the participation of labor therein, 
which it would be necessary for capital to 
make, and should prompt every far-seeing 
capitalist to labor for the general adoption 
of the system hereinbefore proposed. 

BENEFITS TO OPERATIVES. 

The most direct benefit that would re- 
sult from the adoption of the plan proposed 
would, of course, be that which would ac- 
crue to the operatives. Even in the first 
stage of the transition from wage-capital- 
ism to Operative Ownership, that of joint 
operation, the income of the operatives 
would be very greatly increased, as com- 
pared with their wages under the system of 
wage-capitalism, even assuming the labor 
efficiency per man to remain the same, while 
In the second stage of the transition, that 
of joint ownership, the income of the oper- 



OPERATIVE OWNERSHIP 195 

atives as compared with their wages under 
the regime of wage-capitalism, would be 
still further increased by the earning of 
their capital; and in the final stage of the 
change, that in which complete Operative 
Ownership would be realized, their income 
would include the entire profits of the busi- 
ness. 

GREAT INCREASE IN LABOR EFFICIENCY. 

But the labor efficiency of the operatives, 
man for man, would not remain the same 
under joint operation or joint ownership, as 
it is under wage-capitalism. There would be 
a new and a vastly stronger incentive to 
labor efficiency than it is possible to have 
under capitalism — the incentive of a direct 
personal interest by every operative in the 
product of his labor. The result of such an 
incentive would be a better quality and a 
greater quantity per man of the finished 
product, as well as greater care of machin- 
ery and plant, and greater economy of ma- 
terials, than it would be possible to realize 
by the incentive of mere wage§. 

There is, of course, a limit to possible 
labor efficiency in the physical endurance 
of the worker. Within this limit, however, 
the efficiency of the worker is determined 
chiefly by the factors of incentive and train- 



196 OPERATIVE OWNERSHIP 

ing. Indeed the effectiveness of training 
depends in large measure, as we shall see 
later, upon the incentive of the worker to 
receive training. It is incentive which makes 
the labor of the free man, working for 
wages, three times as efficient as the labor 
of the serf. Upon this subject, Herbert 
Spencer, the renowned English sociologist 
and philosopher, says: 

"Along with the negative cause for the 
relaxation and abolition of serfdom there 
is a positive cause— the unfitness of the serf 
for productive purposes. Most incentives 
which make a citizen an effective working 
unit are not operative upon him under a 
regime which represses all initiative and 
furnishes no stimulus to energy. ... In 
Austria the labor of a serf is stated to have 
been equal to one-third of that of a hired 
man. Verifications, here lacking, will, how- 
ever, scarcely be needed by one who watches 
the doings of men among ourselves who are 
employed by vestries and kindred authori- 
ties in road repairing and cleaning. They 
listlessly wield their picks and shovels for 
two or three minutes and then stand up to 
rest and gossip for five."* 

But if the labor efficiency of the free la- 



♦Principles of Sociology, Sec. 807. 



OPERATIVE OWNERSHIP 197 

borer as compared with that of the serf 
has been greatly increased by the incentive 
of the personal gain to be realized by the 
laborer, the efficiency of the free laborer 
has been still further increased by the added 
incentive of participation in the profits of 
his labor, in addition to his wages, in those 
establishments in which profit-sharing has 
been put into operation, even though the 
laborers' share in the profits has been small 
as compared to the share which they would 
receive under the plan of joint operation 
proposed in the last preceding chapter. 

The incentives to labor efficiency under 
the system of profit-sharing — where the 
workers' share of the profits is of a sub- 
stantial character, and not a mere pittance 
designed to serve as an insurance against 
strikes — though lesser in degree, are simi- 
lar in kind to those of Operative Ownership 
and the transitional stages of joint opera- 
tion and joint ownership, through which, as 
we saw in an earlier chapter, that system, 
in its completeness, is ultimately to be 
achieved. The beneficial results, therefore, 
which the experience of workers under cer- 
tain forms of Labor Copartnership would 
warrant us in assuming as likely to be 
realized in these stages, would flow in even 
greater degree from Operative Ownership, 



198 OPERATIVE OWNERSHIP 

INCREASED EFFICIENCY UNDER PROFIT- 
SHARING. 

Of the effects on the workmen produced 
by participation in the profits under the 
capitalist system, Professor Sedley Taylor, 
in his work on profit-sharing, says: "The 
increased activity of the workman, his 
greater care of the tools and materials en- 
trusted to him, and the consequent possi- 
bility of saving a considerable part of the 
cost of superintendence, enable profits to 
be obtained under a participating system 
which would not accrue under the estab- 
lished routine." 

In summing up the results of profit-shar- 
ing as shown in several establishments men- 
tioned by Mr. Taylor, that writer says: 

"The benefits accruing from participa*- 
tion successfully practiced may be thus 
summed up. It furnishes to the workman 
a supplementary income under circum- 
stances which directly encourage, or even 
by a gentle compulsion actually enforce, 
saving; and by associating him in a very 
real sense with his employer it arouses as- 
pirations from which great moral improve- 
ments may be confidently anticipated. The 
employer, besides sharing in whatever sur- 
plus profits are realized by the more effi- 
cient labor which participation calls forth, 



OPERATIVE OWNERSHIP 199 

obtains the boon of industrial stability and 
the support of a united corporate feeling 
elsewhere unknown." 

The expressions above quoted from the 
work of Mr. Taylor are typical of innumer- 
able others which might be quoted from 
workmen, employers and investigators who 
have published the results of their experi- 
ence or observation in regard to profit- 
sharing, which expressions may be found 
abundantly in the literature of co-opera- 
tion. In the cases of profit-sharing which 
have elicited the expressions referred to, 
the share of the profits falling to the work- 
men generally ranged from ten to twenty 
per cent, on the ordinary wages; but it 
often fell below the former figure, and 
rarely exceeded the latter. The increased 
efficiency of the workmen under the stimu- 
lus of participation has been variously stat- 
ed at from fifteen per cent, to thirty-three 
and one-third per cent, of their former ef- 
ficiency. 

When it is said that the incentive of 
profit-sharing has increased the efficiency 
of labor by one-third as compared with the 
ordinary wage-system, it will be recognized 
as a conservative statement by any one who 
has ever been in a position to know the feel- 
ing prevalent among industrial operatives 



200 OPERATIVE OWNERSHIP 

generally, in regard to the result to them- 
selves and their class of working up to their 
full capacity. 

FALLACIOUS NOTIONS ABOUT INCREASE OF 
OUTPUT. 

The fallacious notion still prevails very 
generally among workmen, as it has pre- 
vailed from the beginning of the factory 
system, that any material increase in the 
output of a machine or in the product of a 
man's labor would result in throwing other 
men out of work. Notwithstanding the ef- 
forts of many leaders among the laboring 
classes to correct this erroneous notion it 
still prevails to a very great extent. 

This notion prevails more generally in 
Europe than in America, and in England 
more than any other industrial nation of 
Europe, and its results are most disastrous 
to the prosperity of the country. In his 
book, The War of the Classes, Jack Lon- 
don, a Socialist writer of great popularity, 
and one whose sympathy with the laboring 
classes cannot be doubted, says that the 
English laborer today is starving because 
he is not a scab. He practices the policy 
called "ca'canny," which means "go easy." 
In order to get most for least, he performs, 
in many trades, but from one-fourth to one- 



OPERATIVE OWNERSHIP 201 

sixth of the labor of which he is capable. 
As an instance of this, Mr. London men- 
tions the building of the Westinghouse 
Electric Works at Manchester. The Brit- 
ish limit of work for bricklayers was 400 
bricks per day per man. The Westinghouse 
Company brought over a driving American 
contractor, assisted by several driving 
American foremen, and the English brick- 
layer quickly attained an average of 1800 
to 2500 bricks per day.* 

Nor is America free from the practice 
of "ca'canny" or, as it is called here, "sol- 
diering." On the contrary, the wide prev- 
alence of the practice in this country is 
attested by many writers whose means of 
observation and experience qualify them to 
speak with authority on this subject.** 

MOST FOR LEAST AND LEAST FOR MOST. 

The same impulse which prompts the em- 
ployer to exact most for least evokes on the 
part of the workman the counter-impulse 
to give least for most, hence he soldiers, 
giving only a part of the efficiency of which 
he is capable. With the motive for soldier- 
ing removed, and the incentives of self in- 
terest and mutual regard freely operating 



*The War of the Classes, p. 136. 

**The Social Unrest, by John Graham Brooks, p. 10. 



202 OPERATIVE OWNERSHIP 

upon workmen and capitalists, it is easy to 
see that the efficiency of the workmen would 
be very greatly increased. This means that 
with the same capital, the same building 
space, the same operating expenses, the out- 
put of the plant would be largely increased, 
which increase, except the cost of the ad- 
ditional raw material, would practically all 
go to increase the profits, which in many 
cases, we may well suppose to be more than 
doubled thereby. And if the productive ef- 
ficiency of the operatives were largely in- 
creased by the incentive of profit sharing 
in the form described by Sedley Taylor, 
where the workers' share of the profits 
amounted to only from ten to twenty per 
cent, of their wages, without any voice in 
the management, we may well believe that 
the limit of efficiency would be attained un- 
der joint operation and joint ownership, as 
herein proposed, with the greater share of 
the profits which would fall to the workers 
under that system. 

SCIENTIFIC MANAGEMENT. 

Hitherto, in this chapter, in speaking of 
labor efficiency, I have had in mind the 
efficiency attainable by the ordinary meth- 
ods of management and operation which 
have been in vogue with only slight varia- 



OPERATIVE OWNERSHIP 203 

tion since the beginning of the factory sys- 
tem. 

Within the last few years there has been 
discovered what may be called a new sci- 
ence, the science of management, or, as it 
is sometimes called, "Scientific Manage- 
ment.^ The fundamental laws of this 
science were discovered by Frederick 
Winslow Taylor, and are being developed 
by him and a host of his followers. This 
science, although still in its infancy, prom- 
ises that with little or no additional invest- 
ment of capital in machinery and equip- 
ment, and without any greater expenditure 
of physical energy, the productive efficien- 
cy of human labor will be greatly increased, 
the increase amounting, in some occupa- 
tions, to from one hundred to three hun- 
dred per cent. 

That this new science will work a rev- 
olution in industrial production comparable 
in its results to that which was produced 
by the change from hand labor to ma- 
chinery, is confidently expected. But the 
new system is meeting with vigorous op- 
position from labor organizations, who see % 
in it a means to be used by capitalists for 
"speeding up" their employees, so that to 
gain a small advance in their wages they 
will largely increase the output, and cor- 



204 OPERATIVE OWNERSHIP 

respondingly increase the capitalists' prof- 
its on their labor. Nor are the suspicions 
of the labor organizations wholly without 
foundation; for many of the capitalists 
who have adopted the system have begun 
by taking for themselves the lion's share of 
the increased profit. 

As bearing out this view we may take 
for example, one of the cases described by 
Mr. Frederick Winslow Taylor as showing 
the increased efficiency to be realized by 
the new system — that of the ore-handler 
mentioned at page 44 of his book, "The 
Principles of Scientific Management." The 
ordinary day's work of the ore-handler un- 
der the old system was 12% tons of ore, 
for handling which he received $1.15. Un- 
der the new system he handled 47 tons per 
day. For handling the additional 34% tons 
he received the additional sum of seventy 
cents — two cents per ton. It was worth 
nine and one-fifth cents per ton to handle 
the ore, else the employers would not have 
paid that price ($1.15 for 12% tons). The 
handling of the additional 34% tons there- 
fore was worth $3.11; of this amount the 
employers paid the laborer 70 cents and 
kept for themselves $2.41. 

But whether the objections to scientific 
management under the capitalist system 



OPERATIVE OWNERSHIP 205 

are well-founded or ill-founded, they could 
not be urged under a regime of Operative 
Ownership. A man working for himself 
would welcome the aid of any one who 
could show him how, without any addition- 
al labor or expense, he could double or 
treble his output. 

Scientific management of industry is es- 
sentially the same as scientific farming ap- 
plied to agriculture. The government ex- 
pends millions of dollars annually to teach 
farmers how to conduct their agricultural 
operations more profitably, and the farmers 
welcome such aid, knowing that there is 
no one standing over them to seize three- 
fourths, nor any other part, of what they 
may be able to gain by the adoption of 
scientific methods. In like manner oper- 
ative-owners, knowing that there would be 
no capitalist employer to grab 75 cents 
out of every dollar that they might 
produce by the increased efficiency which 
comes of scientific management, but 
that it would be all for themselves, would 
be quick to adopt the new system. 

CHEAPENING OF PRODUCTS. 

It is not to be supposed, with the general 
adoption of scientific management, and the 
greatly increased output per man and per 



206 OPERATIVE OWNERSHIP 

machine which would result therefrom, 
that the price of commodities would not be 
reduced. Every substantial improvement 
in labor saving machinery whereby the cost 
of production has been materially reduced, 
has resulted in a reduction of the price to 
the consumer, as well as increased profit to 
the manufacturer. The like result would 
doubtless follow the general adoption of 
scientific management. Such general re- 
duction of prices of manufactured com- 
modities would result in a material reduc- 
tion of the cost of living, and thus the 
operative-manufacturer would gain at both 
ends — lower cost of living at one end, and 
increased income at the other. 

Another benefit to the workingman, sec- 
ond in importance only to that of the in- 
creased income which would result from 
Operative Ownership, would be certainty 
and steadiness of employment. Under 
wage-capitalism, as we have seen, if the 
owner cannot run his plant at a profit, as 
sometimes happens in times of business de- 
pression, he will close it down, throwing 
the workmen out of employment, and often 
causing great suffering and want. Under 
Operative Ownership, partial or complete, 
this would not occur. The wider margin 
of profit which, as we have seen, the in- 



OPERATIVE OWNERSHIP 207 

creased efficiency to be attained under this 
system would enable establishments oper- 
ating under it to realize, would enable such 
establishments to reduce prices to a point 
at which there would be no profit under the 
capitalist system, and still leave them a 
profit. There is no economic law better rec- 
ognized, or more universally applied than 
that the lowering of prices tends to stim- 
ulate demand. Capitalists, however, when 
times are dull, and there is a slackening of 
demand for their products, prefer to wait, 
with closed shops, until the demand is re- 
stored by scarcity of the commodity pro- 
duced, rather than to stimulate that de- 
mand by temporarily sacrificing profits. 

The farmer, when he finds at the end of 
the year that his farm has not yielded him 
a profit, does not dismiss his hands, sell off 
his stock, and let his fields lie fallow, and 
his pastures grow up in weeds, until prices 
of farm products rise through scarcity of 
supply. He rather cultivates his fields more 
assiduously, and economizes more strictly, 
than before, determined to realize a profit 
or minimize his loss by increased diligence 
and economy, hence there is no unemploy- 
ment question among farmers. In like man- 
ner the operatives, whether as sole owners 
or as joint owners with non-working capi- 



208 OPERATIVE OWNERSHIP 

talists, having regard to the employment of 
their time to the best advantage possible, 
rather than to waste it in idleness, would 
be prompted to continue the operation of 
their plants, and if necessary sacrifice a 
part of the profits, in order to stimulate a 
demand for their products. 

UNEMPLOYMENT PROBLEM SOLVED. 

According to a survey of unemployment 
covering fifteen of the principal cities of 
the United States, made by the Metropol- 
itan Life Insurance Company of New York 
for the United States Department of La- 
bor, in the Spring of 1915, 11.5 per cent, of 
the wage-earning class were unemployed, 
and 16.6 per cent, only partially employed, 
in those cities. This was during a period 
of extraordinary business depression, and 
it may fairly be assumed, was a considera- 
bly greater percentage than would be either 
partially or wholly unemployed under nor- 
mal conditions. 

Under the influence mentioned in the 
second preceding paragraph, namely: the 
probable desire of operative owners to run 
their plants at a reduced profit, rather than 
close them down, which influence would be 
operative in time of business depression; 
and with the greater purchasing power and 



OPERATIVE OWNERSHIP 209 

greater demand for commodities which 
the increased incomes of the working 
classes would give them under the sys- 
tem of Operative Ownership, in any of its 
stages, the unemployed labor of the coun- 
try would be quickly absorbed in supplying 
the increased demand, and the problem of 
unemployment, so far as those who were 
not physically incapacitated for work were 
concerned, would be, in large measure, 
solved. 

As to those who might become incapaci- 
tated by accident, sickness or old age, they 
would be provided for through their shares 
in the mutual benefit fund of the operatives 
association mentioned in the last preceding 
chapter, whether used as direct insurance 
or as a fund with which to carry outside 
insurance against such contingencies ; while 
in case of retirement or withdrawal of any 
member from the operatives association at 
the close of his industrial career, such mem- 
ber's interest in the establishment would 
have a value which would enable him to 
spend his declining years in comfort and 
leave a substantial sum with which to pro- 
vide for his dependents, at his death. 

It is not pretended, however, that this 
nor any other means will ever utterly abol- 
ish poverty. While human nature endures 



210 OPERATIVE OWNERSHIP 

there will be improvident, lazy, unthrifty 
and vicious individuals, as well as some 
who will be naturally deficient and depend- 
ent through no fault of their own. The 
Master spoke no parable, but an everlast- 
ing truth, when he said: "The poor ye 
have always with you." In so far however, 
as people possess the ability and the in- 
clination to help themselves, poverty will 
be abolished by Operative Ownership. 
Those who lack these qualities will be poor 
and dependent under any social system 
that can be devised. 

BENEFITS TO THE STATE. 

The State also, in its governmental ca- 
pacity, will benefit through the system of 
Operative Ownership by the lessening of 
the cost of government. That poverty often 
leads to crime is a proposition which scarce- 
ly needs to be supported by proofs beyond 
the facts of daily occurrence under the ob- 
servation of those who are in a position 
to note the things that are happening 
around them. The persons of whom we 
daily read as perpetrators of crimes against 
property, such as theft, robbery, burglary, 
and the like, are not, generally speaking, 
persons who have the means of obtaining 
a livelihood in an honest way. Even crimes 



OPERATIVE OWNERSHIP 211 

against the person are in no small degree 
traceable to poverty. Observers of social 
conditions uniformly attest that one of the 
most frequent causes of drunkenness 
among the working classes is the hard, dis- 
couraging conditions under which they 
live, among which conditions are low wages, 
harsh treatment, uncertainty of employ- 
ment and the general helplessness and 
hopelessness of their situation. The effect 
of these conditions is to produce, in those 
who suffer from them, a feeling which finds 
utterance in the often-heard expression: 
"a poor man has no show." Such persons 
often come to regard themselves, and not 
wholly without reason, as the victims of so- 
cial conditions for which society is respon- 
sible, and a feeling of resentment against 
society takes possession of them. A man 
in such a state of feeling is only restrained 
from the commission of crime by fear of 
the consequences. Often this fear is over- 
come and crime results. If, as often hap- 
pens, such a person takes to drinking and 
becomes a drunkard he is prone to the com- 
mission of that long train of offenses 
against the law which flows from drunk- 
enness. 

When Henry Ford, the head of the Ford 
Motor Company which inaugurated at the 



212 OPERATIVE OWNERSHIP 

beginning of 1914 a profit sharing scheme 
by which its employees received a share in 
the profits, amounting to from 50 to 100 
per cent of their ordinary wages, was tes- 
tifying, about a year later, before the 
United States Commission on Industrial 
Relations, he said, concerning the effect of 
the change as affecting the habits of the 
men in regard to sobriety: "Police justices 
say, where Ford employees, recognized by 
their badges, were almost daily seen in the 
prisoners' dock, up to a year ago, since Jan- 
uary, 1914, they have been noticeably ab- 
sent, and are rarely among the unfortu- 
nates brought to justice." 

In its report to the Chicago City Council, 
the Commission on Crime appointed by the 
first named body, after a thorough investi- 
gation, showed that, in the language of the 
Commission : 

"The pressure of economic conditions has 
an enormous influence in producing certain 
types of crime. Unsanitary housing and 
working conditions, unemployment, wages 
inadequate to maintain a human standard 
of living, inevitably produce the crushed or 
distorted bodies and minds from which the 
army of crime is recruited. The crime 
problem is not merely a question of police 
and courts, it leads to the broader problems 



OPERATIVE OWNERSHIP 213 

of public sanitation, education, home care, 
a living wage, and industrial democracy."* 
Prosperity begets in the average man a 
feeling of pride and self-respect which ex- 
ercises a deterrent influence as against all 
those things of which society disapproves, 
and practically all offenses against the 
state come within this category. The pros- 
perous man, too, is more readily and more 
frequently brought under religious influ- 
ences. The poor man and his family often 
feel uncomfortable, with their shabby 
clothes, among their better dressed neigh- 
bors who attend church services, hence they 
stay away. Religious influence is a power- 
ful factor making for better citizenship. 
No man in any civilized land today can be 
true to the principles of his religion, 
whether Jew or Christian, Protestant or 
Catholic, without being a good citizen, for 
the essentials of good citizenship are in- 
cluded in the essentials of every numer- 
ically important religion to be found in 
Christendom. 

BENEFITS TO SOCIETY. 

In a more immediate sense, however, Op- 
erative Ownership and the transitional 



*Report of City Council on Crime, Summary of Findings. 
Sec. 14, p. 12. 



214 OPERATIVE OWNERSHIP 

stages of joint operation and joint owner- 
ship with capital before mentioned as lead- 
ing to the ultimate achievement of that sys- 
tem, would benefit the state by ending the 
class struggle which, almost from the birth 
of wage-capitalism, has been the invariable 
result of the attitude of the last named in- 
stitution toward the laboring classes. With 
the general adoption of Operative Owner- 
ship the relation of employer and employee 
in industrial establishments would be abol- 
ished, class warfare would end, and there 
would be ushered in an era of industrial 
peace. 

It will be readily seen that any system 
which would have the effect of materially 
increasing the income of the laboring class- 
es, which constitute so large a portion of 
the community, would benefit all other 
classes in the community who directly or 
indirectly minister to the wants of the for- 
mer. The physician, the dentist, the law- 
yer, the artist, the newspaper publisher, 
the architect, the dressmaker, and the in- 
numerable other trades and professions 
among which the working classes spend 
their incomes, whether for necessities or 
luxuries, would themselves have their in- 
comes increased by the distribution among 
them, in exchange for the service or com- 



OPERATIVE OWNERSHIP 215 

modities which they should render or sup- 
ply, of the increased incomes, or a substan- 
tial part thereof, of the working classes, 
now become owners or partners in the var- 
ious establishments in which they worked; 
and thus the prosperity of the working 
classes would mean the prosperity of prac- 
tically all other classes of society. 

Closely approaching, if not indeed ex- 
ceeding, in importance, the benefits to be 
derived to the working classes from Oper- 
ative Ownership, are the benefits to be de- 
rived to society in general through the gen- 
eral diffusion of wealth involved in the adop- 
tion of the system of Operative Ownership. 
It is a matter of frequent observation and 
comment that the most serious menace to 
the well being of society, and sometimes it 
is even said, to the perpetuity of the Repub- 
lic, is the unprecedented concentration of 
wealth in the hands of a relatively small 
number of persons, which has taken place 
within the past quarter of a century. This 
menace is generally supposed to lie in the 
prodigious power which wealth, thus con- 
centrated, gives its possessors. 

No less real is the danger from the 
opposition which such concentration of 
wealth has called forth. Legislative bodies, 
whose members, consciously or uncon- 



216 OPERATIVE OWNERSHIP 

sciously, have absorbed, in varying degrees, 
the spirit of Socialism with whieh society 
is permeated, lending a ready ear to the 
popular clamor against all manner of "big 
business," have placed in the statute books 
a variety of laws of a repressive and reg- 
ulative character, which trench upon the 
traditional rights of private property in 
ways which affect the fundamental princi- 
ples upon which rest the title of the work- 
man to his cottage no less than the title of 
the millionaire to his palace. 

With the general diffusion of wealth in- 
volved in the system of Operative Owner- 
ship, making every operative a capitalist, 
the process of concentration of wealth in 
the hands of a few would cease; and the 
wealth already so concentrated would in 
time become diffused through the operation 
of natural forces. For though the adage 
"it is but three generations from shirt 
sleeves to shirt sleeves" is not to be taken 
literally, it still contains an element of 
truth. As a property owner and tax-payer, 
there would come to every operative-owner 
a sense of responsibility and of the sacred- 
ness of the rights of private property 
which would operate to restore that insti- 
tution to the position which it held in the 
estimation of civilized society from the ear- 



OPERATIVE OWNERSHIP 217 

liest ages. Thus while Operative Owner- 
ship would tend to prevent the accumula- 
tion of collossal fortunes, it would tend to 
restore and safeguard the rights of prop- 
erty in general, which rights of late years 
have tended more and more as time went 
on to become an uncertain quantity. Next 
to the emancipation of labor the restora- 
tion and conservation of the rights of pri- 
vate property are perhaps the greatest ben- 
efits which Operative Ownership could ren- 
der to society. 



CHAPTER VI. 

DISAPPEARING RIGHTS OF 
PROPERTY. 

CONSERVATIVE TENDENCY OF OPERATIVE 
OWNERSHIP. 

In the last foregoing chapter I discussed 
the advantages of Operative Ownership to 
the capitalist, to the operatives and to the 
State. I touched briefly, also, upon the 
benefits to society at large. But the great- 
est advantage to accrue to society in this 
general sense, from the system of Opera- 
tive Ownership has scarcely been men- 
tioned. It is that of conserving what re- 
mains, and of restoring what has been lost, 
of the traditional rights of property which 
have come down to us through immemorial 
ages, but which, within the last generation 
or two began to be encroached upon by 
radical legislation, and are today rapidly 
disappearing before the spread of Socialis- 
tic principles which daily find expression in 
new forms of governmental activities 
which exemplify a very pronounced tend- 
ency to enlarge the powers of government 
and to contract the rights of the individual, 

218 



THE RIGHTS OF PROPERTY 219 

more especially in regard to the rights of 
property. 

To the men, and they are numbered in 
many millions, who have neither property 
nor hope of acquiring it under the regime 
of wage-capitalism, the term property, or 
the thing which it represents, has little 
sacredness. The law forbids them under 
penalty of imprisonment, to take or destroy 
the property of another, therefore they re- 
frain from doing so. But as to what the 
law itself or its representatives may do 
with it they are little concerned. If they 
can be made to believe that by confiscation, 
or by certain forms of taxation, or of gov- 
ernmental control which are equivalent to 
confiscation, they and the class to which 
they belong will be benefited, while the 
owners, whom they are taught to regard as 
their exploiters, and the exploiters of their 
class, will suffer, they are more than likely 
to favor them and to aid them. But change 
those millions of propertyless men into 
property owners, as would be done by the 
general adoption of Operative Ownership, 
and there would be multiplied millions of 
property owners to whom the terms "prop- 
erty" and "rights of property" would have 
a meaning such as they have never had be- 
fore to so large a proportion of the popula- 



220 OPERATIVE OWNERSHIP 

tion of any country, and a sacredness such 
as no legislative body might venture to vio- 
late with impunity. 

That the reader may better understand 
the manner in which Operative Ownership 
will operate to restore and conserve the tra- 
ditional rights of property it is necessary 
that some space be devoted to an examina- 
tion of the nature of property and of the 
rights which appertain to it in civilized 
society, and in particular under the con- 
stitution and laws of the United States. 
Also the means must be examined by which 
these rights have been impaired, and by 
which their further impairment or destruc- 
tion is threatened through the activities of 
government, in the face of constitutional 
safeguards designed by the founders of the 
nation to set a limit to the powers of the 
government in its relation to the individual, 
and to preserve inviolate the personal and 
property rights of the individual as against 
the activities of government beyond that 
limit. 

THE RIGHTS OF PRIVATE PROPERTY. 

The term Property, in the sense in which 
it will be most frequently used in this chap- 
ter, signifies the "right of ownership in ex- 
ternal things." In another sense, and one 



THE RIGHTS OF PROPERTY 221 

in which it is most commonly used in rela- 
tion to everyday affairs, it signifies the 
thing owned. The rights of property as de- 
fined by Blackstone, the famous English 
commentator, consist in the free use, enjoy- 
ment and disposal of one's acquisitions by 
the individual subject (or citizen), without 
any control or diminution save only the law 
of the land,* and the control which may be 
exercised by law, having due regard to the 
natural rights of the individual, is limited 
to the necessities of the State in the per- 
formance of its governmental functions. 

Law writers are not in accord as to the 
origin of the right of private property — 
whether it had its origin in the laws of so- 
ciety or in the law of nature which ante- 
dated those of society. But whatever may 
have been the origin of the institution of 
property it is certain that the rights which 
appertain to it now are, within certain 
limitations, subject to control and regula- 
tion by law. These limitations consist in 
the United States, of certain restraints im- 
posed by the people, speaking through their 
national and state constitutions, upon their 
state and national governments, and de- 
signed among other things to safeguard the 



^Commentaries, Book II, Ch. 1. 



222 OPERATIVE OWNERSHIP 

rights of private property against any gov- 
ernmental action which might operate to 
impair or destroy those rights without com- 
pensation to the owner. These restraints, 
and the manner in which they are evaded 
by the government in its sovereign capacity 
will claim a considerable share of the space 
which I shall be able to devote to the sub- 
jects to be discussed in this and the next fol- 
lowing chapters. 

GOVERNMENTAL GREED OF POWER. 

There seems to be something in the na- 
ture of sovereignty which produces in the 
sovereign a certain greed of power and of 
the things that make for power in various 
forms. Another quality manifested no less 
by popular than by monarchial sovereigns, 
is a disposition to ignore or disregard the 
rights of the individual subject or citizen, 
when the recognition of those rights would 
operate to impede or prevent the enlarge- 
ment of the sovereign power. Anciently, 
in monarchial forms of government, the 
King was the sovereign, and he exercised 
despotic sway over all his subjects. Yet 
even in an absolute monarchy there were 
certain rights which belonged to the sub- 
jects, and which the sovereign might not 
violate with impunity. 



THE RIGHTS OF PROPERTY 223 

This was the case in the reign of King 
John of England, who had gone to greater 
lengths than his predecessors in violating 
the hereditary rights of the nobility of the 
realm, until the latter, assembled at Runny- 
mede in the year 1215, forced from the King 
the instrument known as the Magna 
Charta, or Great Charter of Liberties, 
whereby the King, for himself and his suc- 
cessors, solemnly agreed thenceforth and 
forever to observe and respect certain des- 
ignated rights and privileges of the nobility 
and free yeomanry of the realm. So lightly, 
however, were these promises held, and so 
easily forgotten when the occasion arose to 
evade or disregard them, that the succes- 
sors of King John have, on numerous occa- 
sions, been called upon by their subjects to 
reaffirm them. 

Here in the United States, as in all other 
real republics, the people are the sovereign, 
and rule through their legally constituted 
governmental agencies. But though we 
have dethroned the king, and the sovereign 
People rule, the change, so far as the rights 
of property of the individual are concerned, 
is one of form rather than of substance. 
As the king was anciently supposed to 
reign by divine right, we in America have 
attached much the same attribute to the 



224 OPERATIVE OWNERSHIP 

sovereign People, by our general accept- 
ance of the maxim "Vox Populi, Vox Dei" 
— "The voice of the People is the voice of 
God." Anciently it was a maxim that "the 
King can do no wrong." In these days and 
in the United States the idea that the Peo- 
ple can do no wrong finds very general 
acceptance. 

In their greed of power, their inclina- 
tion to extend their influence and activi- 
ties, and their readiness to ignore the rights 
of the individual, the sovereign People show 
their most striking resemblance to the 
sovereign King of ancient time, and forces 
upon the mind of the observer the convic- 
tion that a sovereign is a sovereign the 
world over, and does not change its nature 
with the passage of time, but retains, even 
in America, all a sovereign's proneness to 
forget the limitations of its legitimate 
power, and the rights of the people in their 
individual capacities. 

The sovereign people of the United 
States in their constitution, which is the 
Great Charter of the liberties and of the 
property rights of the individual citi- 
zens, have solemnly declared that no per- 
son shall be deprived of life, liberty or 
property, but by due process of law, that 
private property may not be taken without 






THE RIGHTS OF PROPERTY 225 

full compensation being made therefor; 
that no law shall be passed which shall have 
the effect of impairing the obligations of 
contracts ; and that the equal protection of 
the law shall not be denied to any person. 
Nevertheless, so numerous are the devices 
by which these constitutional guaranties 
are constantly evaded in the form of laws 
which enlarge the scope of the ancient 
sovereign prerogative of taxation, the new 
prerogative of police power, and the com- 
merce clause of the Constitution that no 
one who has studied the activities of our 
government in its relations to the individual 
citizen can doubt that the royal sovereign 
of medieval times was no more adept at 
evading the limitations of Magna Charta 
than are the sovereign people of America, 
in their governmental capacity today, in 
evading the limitations of the Constitution. 

FORMS OF GOVERNMENTAL ENCROACHMENT. 
UPON RIGHTS OF PRIVATE PROPERTY. 

The forms which governmental encroach- 
ments upon the rights of private property 
and private industry take are chiefly those 
of taxation, the police power and regulation 
of interstate commerce. A discussion of 
these powers and of the manner in which 
they are being steadily extended by the gov- 



226 OPERATIVE OWNERSHIP 

ernment in derogation of the rights of pri- 
vate property, sufficient in its scope to give 
an adequate conception of the danger to the 
existing social order which the continuing 
enlargement of governmental powers in- 
volves, is scarcely possible within the al- 
lotted limits of the present chapter. It is 
hoped, however, that enough may be said 
within those limits to warn those who de- 
sire the perpetuation of the present social 
order, with its rights of private property 
and private industry, that the continued 
and progressive enlargement of govern- 
mental powers, and the corresponding con- 
traction of individual rights, must inevita- 
bly result in the complete merging of the 
latter in the government, which is Social- 
ism. 

From time immemorial the right of pri- 
vate property has been recognized as sub- 
ject to certain rights and powers which are 
considered to be inherent in the sovereign, 
and have their origin in public necessity. 
Among the most important of these is the 
power to levy taxes for the support of gov- 
ernment. 

TAXATION. 

"The power of taxing the people and 
their property," says Chief Justice Mar- 
shall, "is essential to the very existence of 



THE RIGHTS OF PROPERTY 227 

government, and may be legitimately exer- 
cised on the subjects to which it is applica- 
ble to the utmost extent to which the gov- 
ernment may choose to carry it. The only 
security against the abuse of this power is 
found in the structure of the government 
itself. In imposing a tax the legislature 
acts on its constituents. This is, in gen- 
eral, a sufficient security against errone- 
ous and oppressive taxation. The people of 
a state, therefore, give to their government 
a right of taxing themselves and their 
property; and, as the exigencies of govern- 
ment cannot be limited, they prescribe no 
limit to the exercise of this right, resting 
confidently on the interest of the legisla- 
tor, and on the influence of the constitu- 
ents over their representatives, to guard 
them against its abuse." 

"Taxes," said Justice Ingersoll of the Cir- 
cuit Court of the United States, "are a por- 
tion which each individual gives of his 
property in order to secure and have perfect 
enjoyment of the remainder. . . . They 
are the price and consideration of the pro- 
tection afforded"; and Montesquieu in his 
famous work, The Spirit of Laws, (Book 
XXXI, Ch. 1) says: "The public revenues 
are a portion that each subject gives of his 



228 OPERATIVE OWNERSHIP 

property in order to secure or enjoy the 
remainder." 

"The subjects of every state," says Adam 
Smith, in that Bible of political economy, 
The Wealth of Nations, "ought to contribute 
to the support of the government as nearly 
as possible in proportion to their respective 
abilities; that is, in proportion to the rev- 
enue which they respectively enjoy under 
the protection of the state. The expense of 
government to the individuals of a great 
nation is like the expense of management 
to the joint-tenants of a great estate, who 
are all obliged to contribute in proportion 
to their respective interest in the estate. 
In the observation or neglect of this maxim 
consists what is called the equality or in- 
equality of taxation." 

The phrase, "according to their respective 
abilities" as used by Smith in the passage 
above quoted, would be ambiguous, did 
he not make his meaning clear by the illus- 
tration which he gives, comparing the ex- 
penses of government to those of a great 
estate to which the joint tenants are "all 
obliged to contribute in proportion to their 
respective interests in the estate." To ap- 
ply the illustration more directly to the ad- 
measurement of taxation, we may regard 
the aggregate of the private wealth of the 



THE RIGHTS OF PROPERTY 229 

nation as one great estate, the expense of 
the care and protection of which by the 
government should be borne by the owners 
"in proportion to their respective interests 
in the estate." 

Upon the authority of the very eminent 
jurists and philosophers above quoted, than 
whom there are no others in their respect- 
ive departments of learning whose views 
are entitled to greater respect, it appears: 

That taxation is the price and considera- 
tion which the individual gives for the pro- 
tection which he receives from the State in 
the enjoyment of his liberty and property. 

That the right of taxation inheres in gov- 
ernment as a necessity of its existence, and 
is unlimited as to amount as the possible 
needs of government are unlimited. 

That all who enjoy the protection of gov- 
ernment are morally bound to contribute to 
its support in proportion to their abilities 
as measured by the amount of the property 
or revenues which they enjoy under that 
protection. 

It follows that when taxes are levied upon 
certain groups or classes of persons arbi- 
trarily, and out of proportion to the amount 
of property which they own or revenue 
which they enjoy, with the result that the 
amount of their taxes bears a higher ratio 



230 OPERATIVE OWNERSHIP 

to the total amount of taxes levied than the 
amount of their property or revenue bears 
to the total amount of taxable property or 
revenues, they are unequally and unjustly 
taxed. 

The rule in regard to the equality or in- 
equality of taxation as stated by Adam 
Smith in the passage above quoted from 
that distinguished writer would seem to 
conform to the most obvious principles of 
justice. It was applied in the prevailing 
forms of direct taxation in the United 
States from the foundation of the govern- 
ment until comparatively recent times. 

Contrary to this rule there have come into 
vogue of late years certain forms of direct 
taxation which affect chiefly the wealthier 
classes, as they were doubtless intended to 
do, in which no pretense is made of any 
definite ratio between the amount of prop- 
erty taxed and the amount of the tax. 

INCOME TAXES. 

Among the most familiar forms of taxa- 
tion which exemplify a departure from the 
principle embodied in the maxim of Adam 
Smith, above quoted, the observation or 
neglect of which, as he says, determines the 
equality or inequality of taxation, may be 
mentioned certain forms of income tax, in- 



THE RIGHTS OF PROPERTY 231 

heritance taxes and taxes on bonds, mort- 
gages, etc. 

A tax upon incomes has been held by the 
Supreme Court of the United States* to be a 
tax on the property from which the income 
is derived. When, therefore, property has 
been taxed, and the income from that prop- 
erty is also taxed by the same taxing power, 
such income tax is double taxation. So it 
is also in the case of taxes on mortgages. 
When, for example, one buys a tract of 
land, paying a part of the price in cash, and 
giving a mortgage to secure the payment 
of the balance, there is no new property or 
value created, for the mortgage merely pro- 
vides, in effect, that if the balance of the 
purchase price is not paid the property 
shall revert to the seller, or be sold to sat- 
isfy the debt. If, therefore, the property is 
taxed at its full value, and the mortgage is 
also taxed, there is double taxation to the 
extent of the tax on the mortgage. So, too, 
in the case of notes or bonds for the pay- 
ment of money. They are not property in 
themselves, but promises to deliver prop- 
erty in the form of money to the payee or 
holder at some future time. If promises 
were property we might all be millionaires, 



♦Dobbins vs. Commissioners of Erie County. 16 Peters, 
435. 



232 OPERATIVE OWNERSHIP 

but if we had to pay taxes on promises we 
should quickly become paupers. 

INHERITANCE TAXES. 

The taxing of inheritances, is perhaps, 
the latest deviation from the principle of 
proportional taxation which prevailed in 
the United States during the first century 
of the Republic. This form of taxation is 
justified by its advocates upon the ground 
that the right to inherit is derived from the 
laws of the State. But this claim is with- 
out foundation in reason or in fact. Private 
property is not the property of the State in 
any sense, consequently the State has no 
moral right to take or dispose of it upon the 
death of the owner. The State does not 
give the inheritor of property any new 
rights of property which he did not possess 
before, but only recognizes a pre-existing 
natural and moral right. I use the term 
natural in this connection in the sense of 
"consonant with the characteristic instincts, 
feelings, reasonings, etc., of human kind; 
especially of social feelings and sensibili- 
ties," as defined by Webster. 

It is probable that the laws of descent and 
inheritance, which in the United States are 
in the main but a re-enactment of the Eng- 
lish Common Law in that regard, had their 



THE RIGHTS OF PROPERTY 233 

origin, not as an act of the sovereign, in 
granting to the subject some right not previ- 
ously possessed by the latter, but as a ju- 
dicial act, deciding which of two or more 
claimants should be recognized as possess- 
ing by virtue of their relations to the de- 
cedent, the stronger claim to the right of 
succession to the possession of his property. 
One of the most ancient of the functions 
that appertain to the quality of sovereignty 
is the administration of justice. While the 
common law was still in the formative stage, 
when it consisted of what Blackstone de- 
scribes as general customs which "received 
their binding power and the force of law 
from long and immemorial usage,"* and be- 
fore the right of the children or descendants 
of a deceased parent or ancestor to succeed 
to the possessions of the latter became rec- 
ognized as a legal right, the courts or func- 
tionaries through whom justice was ad- 
ministered were often called upon to decide 
between rival claimants as to which had 
the better right to such possessions. In 
such cases these functionaries guided by 
"the characteristic instincts, feelings, and 
reasonings of human kind," generally 
decided in favor of the children or nearest 



♦Blackstone's Commentaries, Book II, Ch. 1, p. 11. 



234 OPERATIVE OWNERSHIP 

relations as having the strongest claim to 
the succession, "till at length in process of 
time this frequent usage ripened into gen- 
eral law." 

PROGRESSIVE TAXATION. 

The most radical deviation from the 
principle of proportional taxation with 
which we are familiar, occurs in the form 
of progressive taxation; as where prop- 
erty is taxed at a certain rate up to a desig- 
nated amount in value and at a certain 
higher rate on the value above that amount, 
up to a certain other amount, and so on; 
the rate increasing progressively with every 
step from each particular class to the next 
above. 

The progressive feature in taxation is 
at present most frequently exemplified in 
income and inheritance taxes; but it is 
susceptible of application to bonds, real 
estate, money in bank or almost any other 
form of property. Indeed in view of the 
growing tendency of legislative bodies to 
throw the burdens of government more and 
more upon the rich, without regard to the 
principle of equality or proportion, it may 
be expected at no distant day that the pro- 
gressive feature will be applied to all kinds 
oi taxation. 



THE RIGHTS OF PROPERTY 235 

The most serious vice of the progressive 
principle in taxation is the facility with 
which it lends itself to schemes of spolia- 
tion and confiscation. The principle of pro- 
gression once adopted in taxation, there is 
no measure by which the rate of increase 
at the various stages of progression may 
be determined but the arbitrary will of the 
legislative body or other governmental 
agency which imposes the tax; and while 
at one time the action of such a body mav 
be characterized by moderation, it may 
easily happen that with a change of mem- 
bership it might be actuated by a spirit 
radically hostile to the owners of large or 
even moderately large fortunes, and fix the 
rate of the surtaxes at such a figure as 
would amount to undisguised confiscation. 
That progressive taxation not only is a 
convenient instrument of confiscation but is 
the means actually contemplated by Social- 
ists for the confiscation of whatever prop- 
erty of the wealthy classes may chance to 
escape confiscation when the Socialistic re- 
gime shall be ushered in, and the Socialist 
Commonwealth shall take possession of all 
the means of production, distribution and 
exchange, is shown by the following extract 
from a highly authoritative work by Mr. 



236 OPERATIVE OWNERSHIP 

John Spargo, who is one of the leading So- 
cialist writers of America: 

"Finally," says Mr. Spargo, "it will be 
possible to adopt measures for eliminating 
the unearned incomes entirely by means of 
taxation, such as the progressive income 
tax, property and inheritance taxes. Tax- 
ation is, of course, a form of confiscation, 
but it is a form which has been familiar, 
which is perfectly legal, and which enables 
the confiscatory process to be stretched out 
over a long enough period to make it com- 
paratively easy to reduce the hardship to 
a minimum. By means of a progressive in- 
come tax, a bond tax and an inheritance tax 
it would be possible to eliminate the un- 
earned incomes of a class of bond-holders 
from society within a reasonable period, 
without inflicting injury or hardship on any 
human being."* 

If it be true as stated by Justice Ingersoll 
in the language before quoted from that 
learned jurist, and as recognized by political 
economists, that taxes are "the price and 
consideration of the protection afforded" 
by government to the owner of property, it 
follows that taxation out of proportion to 
the protection afforded, or out of propor- 



*Socialism, by John Spargo, 2nd Ed. p. 336. 



THE RIGHTS OF PROPERTY 237 

tion to the value of the property taxed, 
which is the same thing, is without consid- 
eration, and is unequal and unjust, to the 
extent of the excess above the just propor- 
tion of taxes which the property should 
bear. 

When the owner of property is taxed at 
a certain rate on its value or income up to 
a given amount, and at a higher rate on 
property or income in excess of that amount 
up to a certain other amount, and so on, as 
in progressive taxation, the property bear- 
ing the higher rates receiving no more pro- 
tection than that which pays the lowest 
rate, such owner receives no consideration 
for the surtaxes which he is compelled to 
pay, and his property is to that extent, un- 
equally taxed. 

What has been said in the foregoing pages 
in regard to the principle of proportional 
taxation and the forms of taxation in 
which that principle is contravened, must be 
understood as applying only to taxes levied 
for the expenses of government in what may 
Be called the normal condition of national 
affairs. For it is not to be supposed that in 
the always possible event of conditions aris- 
ing which might threaten or precipitate 
some great national catastrophe, involving 
the rights or liberties of the people, or pos- 



238 OPERATIVE OWNERSHIP 

sibly the very existence of the nation, the 
government should be held to a nice balanc- 
ing of individual rights against national 
needs. In such a contingency all rules and 
all theories in regard to limitations of gov- 
ernmental powers must yield, if need be, to 
that supreme law which may be called the 
law of national self-preservation.* 

GOVERNMENTAL REGULATION OF INDUSTRY. 

The most flagrant form of encroachment 
by the government upon the rights of pri- 
vate property is that of government regula- 
tion. We have seen, in the beginning of 
this chapter, that the rights of property 
consist in the free use, enjoyment and dis- 
posal of one's acquisitions without <my con- 
trol or diminution, save only the law of the 
land. The supreme "law of the land" in the 
United States is the Federal Constitution, 
and that instrument expressly forbids the 
taking of private property without due 
process of law or without compensation. 



*It is conceivable that such conditions may develop in the 
relations between capital and labor that, to hasten a readjust- 
ment of those relations on a basis of social justice, it may be 
necessary to invoke the taxing power, as a simpler and 
speedier, though less just method than the power of eminent 
domain, for applying pressure to capitalist owners of inds- 
trial establishments to induce them to enter into arrange- 
ments with their operatives for joint operation, etc., as pro- 
posed in the third chapter of this book. 



THE RIGHTS OF PROPERTY 239 

It has been declared by the Supreme 
Court of Illinois* and other high legal au- 
thorities, that when an owner is deprived of 
any of the attributes of property, he is de- 
prived of his property. Now if in the ex- 
ercise of government regulation the owner 
of property is deprived of the free use, en- 
joyment or control of it without compensa- 
tion and due process of law, or the value of 
his property is impaired or destroyed, he is 
unlawfully deprived of it, and this is what 
happens, as we shall see, in very many cases 
of government regulation. 

The forms of government regulation with 
which we are most familiar, (although there 
are others), are those exercised by the na- 
tional government under claim of authority 
derived from the commerce clause of the 
constitution, and by state governments un- 
dex what is called the police power of the 
State. 

FEDERAL REGULATION. 

The power conferred by the commerce 
clause is given in the following language: 

"The Congress shall have power . . . 
to regulate commerce with foreign nations 



♦Ritchie v. People, 155 111., 98. 



240 OPERATIVE OWNERSHIP 

and among the several states, and with the 
Indian tribes.* 

The granting to Congress of the power to 
regulate commerce with foreign nations 
was the principal object of the commerce 
clause of the constitution; and the power 
to regulate commerce among the several 
states was regarded by the framers of the 
constitution as merely supplemental to that 
power. It was said by Mr. Madison in the 
Federalist that without this supplemental 
provision the great and essential power of 
regulating commerce with foreign nations 
would have been incomplete and ineffectual, 
and that with state control of interstate 
commerce, ways would be found to load the 
articles of import and export during the 
passage through their jurisdictions with du- 
ties which would fall on the producers of 
the latter and the consumers of the for- 
mer.! To prevent such action by the sev- 
eral states was the object of the clause in 
question. This intention is further indi- 
cated by the following clause of the Consti- 
tution in relation to the same matter: 

"No tax or duty shall be laid on articles 
exported from any state. No preference 



♦Constitution of the United States, Art. I., Sec. 8, Par. 18. 
fjudson on Interstate Commerce, Sec. I. 



THE RIGHTS OF PROPERTY 241 

shall be given by any regulation of com- 
merce or revenue to the ports of one state 
over those of another; nor shall vessels 
bound to or from one state be obliged to en- 
ter, clear, or pay duties in another."* 

ENLARGEMENT OF GOVERNMENTAL POWERS BY 
JUDICIAL CONSTRUCTION. 

It was never dreamed by the framers of 
the Constitution, profound and far-seeing 
statesmen though they were, that the plain 
and simple words "to regulate commerce 
. . . between the several states," would 
ever be tortured into giving Congress the 
power to control and regulate the produc- 
tion within the several states of articles 
which might become the subjects of inter- 
state commerce, nor to control the relations 
which might subsist between persons en- 
gaged in such production and their em- 
ployes, as has been done of late, even to the 
regulating of wages and of hours and condi- 
tions of labor, as well as to a thousand other 
details of production and distribution, the 
power to regulate which is claimed and ex- 
ercised by the national government under 
the commerce clause above quoted. 

But the art of legislation by judicial con- 
struction, if not altogether unknown in the 



*Judson on Interstate Commerce, Art. I., Sec. 9, Par. 5. 



242 OPERATIVE OWNERSHIP 

days of the f ramers of the constitution, had 
not developed into the fine art that it is to- 
day. It is by this means that courts are able 
to read into laws and constitutions things 
which the f ramers thereof never thought of 
putting into them, and powers which the 
people never conferred upon their govern- 
ments, state or national, are assumed by 
these agencies, and exercised in derogation 
of the personal and property rights of the 
people in their individual capacities, in the 
face of constitutional provisions guaran- 
teeing those rights. Thus it is that the 
power to regulate commerce among the sev- 
eral states has been expanded so as to bring 
under federal control and regulation, at the 
discretion of the government, the means of 
production and distribution of practically 
every commodity produced in the United 
States. For there are few of the products 
of industry which may not, in one way or 
another, become subjects of interstate com- 
merce. 

THE SHERMAN ANTI-TRUST ACT. 

Under this power Congress passed the 
Interstate Commerce Act, with its numer- 
ous amendments under the operation of 
which the railways have been brought 
under federal regulation, with the results 



THE RIGHTS OF PROPERTY 243 

which we have seen in an earlier part of this 
book, and of which more will be said in the 
next chapter. Under this power also there 
was passed by Congress a law, which has 
become known as the Sherman Anti-trust 
Act, forbidding all contracts or combina- 
tions in restraint of trade and forbidding 
any person "to monopolize or attempt to 
monopolize any part of the trade or com- 
merce" between any state or territory and 
any other state or territory. 

For years after the passage of this act 
no serious attempt was made by the gov- 
ernment to prosecute any person for its 
violation. One political party succeeded 
another in the administration of the gov- 
ernment, each in vigorous language declar- 
ing its hostility to trusts, yet seeming to 
realize, under the responsibility of govern- 
ment, that the so-called trusts were a nat- 
ural and a necessary development of mod- 
ern industry; that the production of com- 
modities on the scale demanded by modern 
industrial conditions necessitated large ag- 
gregations of capital; that the partial elim- 
ination or restriction of competition prac- 
ticed by these organizations was necessary; 
and that, if these advantages were to be 
denied to American industries, the latter 
would be unable not only to compete in 



244 OPERATIVE OWNERSHIP 

foreign markets with the products of other 
nations where industry was not thus handi- 
capped, but would be unable to hold their 
own in the home market, against foreign 
competition, unless protected by an exces- 
sively burdensome tariff. 

The politicians of both parties vied with 
each other in the bitterness of their de- 
nunciation of the trusts, and succeeded in 
producing such a feeling of hostility to- 
ward them that the government was com- 
pelled to take action against them under 
the Sherman Act. A few of the trusts, 
moreover, had taken advantage of the 
power of their great wealth to raise prices 
or to resort to unfair methods of compe- 
tition, and afforded just grounds for visit- 
ing upon those particular trusts the penal- 
ties of the law. 

One of the most serious faults of the 
Sherman Law was the vagueness with 
which certain offences were denned to 
which it attached severe penalties. What, 
for instance, would constitute a restraint 
of trade was largely a matter of opinion, 
upon which any two persons might well 
differ. Upon this question even the courts 
have never been able to agree. Yet, under 
the Sherman Law, every merchant or manu- 
facturer engaged in interstate commerce 



THE RIGHTS OF PROPERTY 245 

must decide it for himself, and decide it, not 
according to any recognized standard, (for 
there is none), but according to the views 
of the court or judge who may be called 
upon later to pass judgment on the ques- 
tion. An error of judgment might make 
his act a crime punishable by heavy penal- 
ties, without any intent on his part to vio- 
late the law. 

VENERABLE TRADITIONS VIOLATED. 

From the earliest times of English juris- 
prudence, (upon which our own is based), 
a criminal intent has been deemed to 
be an essential element of every crime. 
But men have been convicted of crime un- 
der the Sherman Act who had no thought 
that their acts could be of a criminal na- 
ture. Shortly after the passage of the act 
the parties to what was known as the 
"Wire Rope Poor' consulted Senator Hoar 
of Massachusetts, one of the framers of 
the act in question, as to whether or not 
their manner of doing business was con- 
trary to law. Mr. Hoar, who was a lawyer of 
exceptional ability, and who as one of its 
framers, may be supposed to have known 
the intent and legal effect of the Sherman 
Act if any one did, advised them, in a very 
elaborate opinion, that their method of do- 



246 OPERATIVE OWNERSHIP 

ing business in no way conflicted with the 
provisions of the Sherman Act. Yet they 
were afterwards prosecuted by the govern- 
ment and declared to be guilty of its viola- 
tion. 

Capital is notoriously timid. With such 
a law hanging over them it is little wonder 
that men of large affairs proceed cautious- 
ly and hesitatingly, or omit altogether 
many legitimate methods of extending 
their business operations, through fear 
that their activities may be construed to 
be "in restraint of trade," and may be visit- 
ed with disastrous consequences at the 
hands of the government. Many concerns, 
though innocent of intentional violation of 
the law, have been compelled to pay out in 
their defense, enormous sums, besides 
which their responsible managers have 
been subjected to anxiety and humiliation 
not to be measured in terms of money. To 
be big and successful seemed to be a sure 
way of attracting the "regulative" atten- 
tions of the government. 

REGULATION RUNNING RIOT. 

As if the Interstate Commerce Commis- 
sion, the forty-odd state railway commis- 
sions or boards, the Sherman Anti-trust 
law, and some hundreds of state regula- 



THE RIGHTS OF PROPERTY 247 

tions, were not enough in the way of gov- 
ernment regulation of business, we have 
the new Federal Trade Commission, with 
powers more far-reaching than those of any 
other similar governmental agency here- 
tofore established. 

This commission is given the broadest 
inquisitorial powers, and may pry into the 
private business affairs of any corporation 
engaged in interstate commerce, and make 
them a matter of record, as part of their 
proceedings. While there have not as yet 
been any judicial constructions as to the 
full extent of its powers, it is understood 
that the commission has power under the 
law, in certain contingencies, to fix the 
price and the terms of distribution of 
industrial products. In short, much the 
same powers which the Federal Reserve 
Board has over banks, and which the Inter- 
state Commerce Commission has over rail- 
ways, the Federal Trade Commission has 
over all other businesses, except these. 



CHAPTER VII. 

DISAPPEARING RIGHTS OF PROP- 
ERTY— (Continued). 

THE POLICE POWER. 

All the powers, and more besides, which 
the national government exercises under 
the commerce clause within the several 
states in the regulation of industry, the 
states exercise under the police power. This 
power may be defined as the power of the 
state to make and enforce laws and regula- 
tions to promote the health, safety, morals, 
convenience and general welfare of the com- 
munity. It is declared by the Supreme 
Court of Illinois* to be an attribute of sov- 
ereignty. 

When the average person hears mention 
made of the "police power" he quite natur- 
ally supposes it to refer to the power of the 
police to make arrests, to preserve the peace, 
and such like functions. But these, as 
we shall see, are but a very small part of 
what is comprised in the "police power" 



*Chicago v. Bowman Dairy Co., 234 III, 294, 

248 






THE RIGHTS OF PROPERTY 249 

as that term is defined by the courts. 
"We hold," said Justice Harlan, in a recent 
decision of the United States Supreme 
Court, "that the police power of a state em- 
braces regulations designed to promote the 
public convenience or the general prosperity 
as well as regulations designed to promote 
the public health, the public morals or the 
public safety."* 

MENACE OF POLICE POWER. 

It is in the broader sense above mentioned 
by the court, — in the sense of "regulations 
designed to promote the public convenience 
and the general prosperity," that the police 
power will be discussed in this chapter. For 
in that sense the police power affects the 
property rights of the individual citizen 
more directly and more vitally than does 
any other attribute that appertains to the 
sovereignty of the state, except perhaps the 
taxing power. In the improper exercise of 
the police power lies the most serious men- 
ace to the rights of property which con- 
fronts the American property owner today. 

To the exercise of the police power as a 
means of promoting the public comfort and 
convenience, and the general welfare of the 



*C, B. & Q. R. R. v. Illinois, 200 U. S., 561. 



250 OPERATIVE OWNERSHIP 

state, there is one fatal objection, namely: 
that it permits the taking of private prop- 
erty for public use without compensation 
or due process of law. "By this general po- 
lice power of the state," says Justice Cooley, 
"persons and property are subjected to all 
kinds of restraints and burdens in order 
to secure the general comfort, health and 
prosperity of the state." 

A CREATURE OF THE COURTS. 

The term "police power," as also the thing 
to which the term has been applied, is the 
creature of the courts in the United States. 
Neither in name nor in nature, in the sense 
above defined, did it exist at the time of 
the American revolution or of the adoption 
of the national Constitution. 

When Blackstone published his commen- 
taries on the Laws of England, a few years 
prior to the American revolution, the term 
"police power" was unknown. Among the 
attributes of sovereignty which he mentions 
there is nothing which bears any resem- 
blance to the thing to which American 
courts have given the name of the police 
power. 

The powers embraced in this new attri- 
bute of sovereignty, of promoting the pub- 
lic health, the public safety, the public mor- 



THE RIGHTS OF PROPERTY 251 

als, and the general comfort, convenience 
and welfare of the community, have existed 
in England from time out of mind; not 
however as "police powers," nor as attri- 
butes of sovereignty, but as ordinary func- 
tions of government, to be exercised with 
due regard for the rights of private prop- 
erty. For while the government, for the 
general welfare, had the power to take 
what it would of private property, it could 
only do so upon making full compensation 
therefor to the owner. 

The first notable case in which the right 
of the State to take or impair the value of 
private property for public use, to promote 
the "public health, the public morals, the 
public safety or the general welfare," with- 
out compensation to the owner, was assert- 
ed, was that of Trinity Church in the City 
of New York. 

POLICE POWER VERSUS CONSTITUTIONAL GUAR- 
ANTIES. 

In 1697 King William III of England 
granted a charter of incorporation to Trin- 
ity Church, and therein confirmed to the 
corporation a tract of land adjoining the 
church to be used for the burial of the dead. 
In 1823 the corporation of the City of New 
York passed a by-law forbidding the burial 



252 OPERATIVE OWNERSHIP 

of the dead in certain territory, which in- 
cluded part of the land held by the church 
under the charter from the King, and used 
for the burial of the dead. In a suit in re- 
lation to the matter which came before the 
Supreme Court of the State of New York* 
it was contended in behalf of the church 
that the charter from the King was a con- 
tract and that it would be broken, contrary 
to the constitutional guaranty in regard to 
the inviolability of the obligations of con- 
tracts, if the by-law in question should be 
enforced. Furthermore it was contended 
that to forbid the use of the land for the 
purpose for which it had been fitted, at 
great expense, by the construction thereon 
of costly vaults by private owners under 
grant from the church corporation, would 
be a taking of private property without com- 
pensation in violation of the constitution. 
In this connection it must be understood 
that the Supreme Court of the United 
States, in the famous Dartmouth College 
Case, in an opinion written by Chief Jus- 
tice Marshall, probably the most illustrious 
jurist of American history, had previously 
held that a charter from the King creating 
a corporation with definite powers, privi- 
leges and duties, was a contract, and any 



*Coates v. Mayor of New York, 7 Cowan, 585. 



THE RIGHTS OF PROPERTY 253 

abridgement by the state of the powers and 
privileges thus granted would be an impair- 
ment of the contract within the meaning of 
that clause of the constitution forbidding 
the states to pass any law impairing the ob- 
ligations of contracts. 

ji The result of the litigation, in the Trinity 
Church case, as tersely stated by the dis- 
tinguished American social and historical 
writer, Brooks Adams, was that: "In the 
teeth of recent precedents, the Supreme 
|Court of the State of New York decided 
that, under the police power, the legislature 
of New York might authorize this sort of 
appropriation of private property for sani- 
tary purposes, without paying the owners 
for any loss they might thereby sustain."* 

The doctrine of the Trinity Church case 
was adopted by other courts, slowly at first, 
and afterwards more rapidly, until it has 
become fairly well established as a principle 
of American law. 

The police power, not resting upon the 
decision of any single court, but upon many 
decisions of many courts, with varying 
views as to what matters come within the 
scope of its operation, and the extent to 
which the powers in question should be held 

*The Theory of Social Revolutions, by Brooks Adams, 
p. 89. • - 



254 OPERATIVE OWNERSHIP 

to affect the constitutional rights of prop- 
erty, there came to be in course of time such 
a variety of decisions, representing all 
shades of opinion as to the scope and limits 
of the police power, that whatever view the 
court, in any given case, might choose to 
take, though flatly opposed to some previ- 
ous decision involving substantially the 
same state of facts, it could find not one, 
but many, precedents to support it. 

Thus, it happened that about fifty years 
after the decision in the Trinity Church 
case, another case occurred in Illinois under 
an identical state of facts in all essential 
respects, save that the charter in the Illinois 
case had been granted by the State of Illi- 
nois instead of by the King, as in the New 
York case. But here the Court held direct- 
ly the opposite to the New York decision. 

CONFLICTING DECISIONS. 

The conflicting character of court de- 
cisions in cases involving questions relating 
to the police power is not to be attributed 
to the fact that they are rendered in differ- 
ent jurisdictions or by courts affected by 
varying local influences. The like conflict 
may be found in many cases between de- 
cisions of the same court. Thus a statute 
of Illinois providing that: "No female 



THE RIGHTS OF PROPERTY 255 

shall be employed in any factory or work- 
shop more than eight hours in any one day, 
nor more than forty-eight hours in any one 
week," was held unconstitutional as an at- 
tempt to invade the right of private prop- 
erty by legislative power in the disguise of 
a police regulation.* A few years later an- 
other law was passed in the same state pro- 
viding that: "No female shall be employed 
in any mechanical establishment, factory 
or laundry more than ten hours in any one 
day." Although no question was raised in 
regard to the difference in the number of 
hours which a female might be employed, 
the second law was held, by the same court, 
to be a proper exercise of the police power, 
and therefore valid.** 

Such conflicts are inevitable when the 
subject of the decision is a power which 
rests not upon any constitutional provision 
or legislative enactment, but upon the un- 
controlled discretion of the court in each 
particular case. Rights of persons or prop- 
erty held at the unlimited discretion of a 
court are held by a precarious and uncertain 
tenure. Certainly they are not held with the 
security contemplated by the framers. of 
the constitution. 



^Ritchie v. People, 156 111., 98. 
**Ritchie v. Wayman, 244 111., 509. 



256 OPERATIVE OWNERSHIP 

CHARGES OF JUDICIAL BIAS. 

The judicial discretion which is the life 
principle of the police power, is become the 
cause of no little embarrassment to the 
courts, in the sense that they often find 
themselves at their wits' end in the effort 
to reconcile conflicting decisions rendered 
upon the same question, by the same court, 
at different times. The long line of decisions 
which each litigant is able to cite in support 
of its contention, in any case involving the 
question whether a given legislative or ex- 
ecutive act is void as a violation of the con- 
stitutional safeguards of the rights of 
property and person, or valid as a proper 
exercise of the police power, brings to the 
defeated party, and the class which such 
party represents, the conviction that only 
the bias of the court could bring it to disre- 
gard so formidable a line of precedents. 
The result of this conviction is that the 
charge of bias is often made against the 
courts, on the one side by advocates of 
"progressive" legislation, and on the other 
by the representatives of the interests ad- 
versely affected by such legislation, and the 
bias, real or imagined, of the courts against 
"progressive" legislation as charged by the 
advocates of such legislation has been made 
the basis of a demand for the recall of ju- 



THE RIGHTS OF PROPERTY 257 

dicial decisions in cases involving the exer- 
cise of the police power. 

On the other hand, in refutation of the 
charge of bias against "progressive" legis- 
lation, so far as that charge is made with 
reference to the United States Supreme 
Court, Mr. Charles Warren, formerly As- 
sistant United States Attorney-General, 
published an article in the Columbia Law 
Review, in April, 1913, in which he shows 
by a careful enumeration and classification 
of all the cases decided by the Supreme 
Court during the twenty-five year period, 
from 1887 to 1911, inclusive, that "out of 
over 560 state statutes or other forms of 
State action adjudicated under the 'due pro- 
cess' and 'equal protection' clauses . . . the 
Court has upheld over 530, it has held in- 
valid only three relating to 'social justice/ 
and only thirty-four relating to private 
rights of property." 

NO EIAS AGAINST "PROGRESSIVE" LEGISLATION. 

Commenting on the showing of the court 
in the smallness of the number of cases in 
which the restrictions of the constitution 
under the "due process" clause were held to 
apply to legislative acts, Mr. Warren says in 
his article above mentioned: "The actual 
record of the Court thus shows how little 



258 OPERATIVE OWNERSHIP 

chance a litigant has of inducing the Court 
to restrict the police power of a state . . . 
in other words it shows the court to be a 
bulwark of the police power." 

In a later article (December, 1913) con- 
tributed by the same writer to the same 
magazine, on the same general subject, he 
says: 

"In other words, in this great and vitally 
important class of cases the Court has set- 
tled the boundary line which separates the 
end of the police power and the beginning 
of the Constitutional guaranties, over- 
whelmingly in favor of the State as against 
the individual " 

" 'Due process' and the 'police power' both 
being indefinite terms, the court has exer- 
cised a wide discretion in enlarging the 
scope of both in favor of the State." 
■ It must be admitted, in view of the facts 
shown by Mr. Warren, that such a liti- 
gant as he refers to in the passage quoted 
above would have very little chance indeed 
before the Supreme Court. 

COURTS INFLUENCED BY PUBLIC OPINION. 

"Some one has aptly said that the Su- 
preme Court follows the election returns," 
writes a contributor to the Popular Science 
Monthly; and in view of the facts shown 



THE RIGHTS OF PROPERTY 259 

by Mr. Warren in the magazine article be- 
fore mentioned, there would seem to be 
some warrant for the observation. 

Mr. Warren, in a later contribution to the 
magazine first above mentioned in which he 
assumed again the role of friend of the 
court, says: 

"The tendency of the present-day mind 
is unquestionably to tolerate increased re- 
striction of the individual by the state in 
the interest of the general public welfare. 
It is highly important, therefore, that the 
layman should comprehend how far the 
courts are embodying in their decisions this 
tendency." 

Mr. Justice Holmes of the Federal Su- 
preme Court in delivering the opinion of 
the Court in what are known as the Okla- 
homa Bank Guaranty cases,* said : "It may 
be said in a general way that the police 
power extends to all great public needs. 
It may be put forth in aid of what is sanc- 
tioned by usage, or held by prevailing mor- 
ality or strong and preponderant public 
opinion to be greatly and immediately 
necessary to the public welfare." 

In these words of Justice Holmes, though 
but recently uttered, he states a rule which 



*Noble State Bank v. Haskell, 219 U. S. 104. 



260 OPERATIVE OWNERSHIP 

has been applied on several historical oc- 
casions in this country. 

It means that whenever "preponderant 
public opinion" demands any specific "re- 
form" or change in the law, the police pow- 
er of the state may be invoked to accom- 
plish the desired change; and however 
much private property may be taken, de- 
stroyed, or impaired in value, the constitu- 
tional guaranties in regard to the rights of 
private property become dead letters, and 
the police power, to whatever extent pre- 
ponderant public opinion expressed in the 
form of legislative enactments may hold it 
to be "greatly and immediately necessary to 
the public welfare," becomes the supreme 
law. 

Many will say this is as it ought to be — 
that private rights should yield to the pub- 
lic welfare as indicated by "preponderant 
public opinion" expressed in legislative 
acts. 

But public opinion is variable, uncertain, 
fluctuating. As a criterion of human 
rights history brands it as the most treach- 
erous that may be conceived, for it has 
justified every crime ever perpetrated by 
the many against the few, with instances 
of which history teems. It has lit the fag- 
gots of intolerance and persecution, and 



THE RIGHTS OF PROPERTY 261 

given countenance to innumerable crimes 
against the natural as well as the social 
rights of man. It is only when guided itself 
by an enlightened sense of justice, and 
guarded against hasty _ and unconsidered 
action, to which human nature is prone, 
that its judgment, registered according to 
the forms of law, is entitled to considera- 
tion. Very often, however, it is not so 
guided; and very often also, that which 
passes for public opinion in a community is 
merely the opinion of a small but clamour- 
ous and aggressive minority of that com- 
munity. Moreover under the American 
system of government it is not the function 
of courts but of legislatures to concern 
themselves about public opinion. In passing 
upon the validity of a legislative act the 
question for the courts to consider is, not 
"Is it popular?" but "Is it constitutional?" 
The former question, however, would seem, 
from the facts shown by Mr. Warren in 
the magazine article above mentioned, to 
be the one that is uppermost in the judicial 
mind. 

HOW THE POLICE POWER OPERATES. 

The manner in which the police power has 
operated upon private property has not 
been by a physical taking in the sense of 



262 OPERATIVE OWNERSHIP 

acquiring title to or possession of the thing 
taken, but by imposing some restraint or 
regulation upon the use of it by the owner, 
or by imposing upon the owner some duty 
or obligation with relation to it, which had 
the effect of destroying or diminishing its 
value either for purposes of sale or ex- 
change or for profitable use. In a few cases 
indeed, courts have held that unless there 
was an absolute taking of property there 
could be no violation of the constitutional 
guaranties in regard to private property. 
But the overwhelming preponderance of au- 
thorities reject this view. 

Numerous instances might be cited, did 
space permit, in which, as in the Kansas 
Brewery Cases* of recent history, property 
which had been legitimately acquired and 
legitimately used, and which had paid in 
the form of taxes for the protection which, 
in common with all other private property, 
it was entitled to receive, was by legisla- 
tive enactment, conformably to the demands 
of "preponderant public opinion," forbid- 
den to be longer used for the only purpose 
to which it was adapted, thereby destroy- 
ing the value of the property, while leaving 
the owners "the empty husks of title and 



*Mugler v. Kansas, 123 U. S., 623. 



THE RIGHTS OF PROPERTY 26S 

possession." All this the State, for the gen- 
eral welfare, might properly have done upon 
making compensation for the property de- 
stroyed, which, however, was not done. 

THE GRANGE MOVEMENT. 

Another notable case of "preponderant 
public opinion" finding expression in legisla- 
tive acts and judicial decisions which have 
operated to greatly enlarge the powers of 
government over private property is that 
of the historic "Grange" organization of the 
early seventies of the last century. This 
^was an association designed to promote the 
interests of the agricultural classes. By its 
great numerical strength and excellent or- 
ganization it was enabled to secure the 
passage of a number of laws highly favor- 
able to the farming interests, among which 
were laws regulating elevator charges and 
railway rates. Out of these laws arose a 
number of law suits in which the power of 
the legislatures of the several states to reg- 
ulate such charges was disputed. These 
suits are known in the decisions of the Su- 
preme Court as the "Granger Cases." 

The question immediately at issue in the 
Munn case was the constitutionality of a 



264 OPERATIVE OWNERSHIP 

law of the State of Illinois fixing the max- 
imum rates of storage for grain elevators 
within the State. 

The elevator in question was owned and 
operated by private individuals, and with- 
out any public franchise or privileges what- 
ever, but the Court held that the Legis- 
lature had power nevertheless, without vio- 
lating any of the provisions of the consti- 
tution in regard to the rights of private 
property, to fix maximum rates for such 
conveniences. 

The ground upon which the court based 
the right of governmental regulation was 
that the elevator business is a public em- 
ployment and clothed with a public inter- 
est. 

The court held in effect, that when the 
nature or magnitude of an enterprise is 
such as to be of public consequence and af- 
fect the community at large, the owner in 
devoting his property to such enterprise, 
grants to the public an interest in its use, 
and must submit to be controlled by the pub- 
lic in regard to charges, and such other 
matters as the government shall deem to be 
for the common good. 

This decision is one of the most impor- 
tant ever rendered by an American court, 
not only as the first judicial announce- 



THE RIGHTS OF PROPERTY 265 

ment in the United States of the doctrine 
that private property employed by its 
owner in dealings with the public, with- 
out making use of any public property or 
franchise whatever, was subject to govern- 
mental regulation as to rates and charges, 
but also as announcing for the first time 
the broader principle that when private 
property is used "in such a manner as to 
be of public consequence and affect the 
community at large" it is subject to such 
regulation. Not only is the doctrine thus 
announced the basis of the right of govern- 
ment regulation of railways, but it gives 
judicial sanction to governmental regula- 
tion, not only in regard to rates, but in 
various other ways, of all industries of any 
public consequence. "That decision," said 
Associate Justice Field, of the Supreme 
Court, referring to the case of Munn v. 
Illinois, in his dissenting opinion in one of 
the "Granger Cases,"* "will justify the leg- 
islature in fixing the price of all articles 
and the compensation for all services. It 
sanctions intermeddling with all business 
and pursuits, leaving the use and enjoy- 
ment of property, and the compensation 
for its use to the discretion of the legis- 
lature." 



*C, B. & Q. R. R. v. Iowa, 94 U. S., 155. 



266 OPERATIVE OWNERSHIP 



And thus again we see the police power 
of the State put forth, in aid of what is held 
by "strong and preponderant public opinion, 
to be necessary to the public welfare." The 
action of the legislatures and the courts in 
the "Granger Cases" shows that if only 
"preponderant public opinion" is sufficient- 
ly strong and well organized, the general 
principle, universally recognized, that ev- 
ery man may fix what price he pleases upon 
his own property or the use of it, will be 
set at naught, and any form of private 
property, "when used in a manner to make 
it of public consequence and affect the 
community at large" may, under the doc- 
trine of the decision in the case of Munn 
v. Illinois, be subjected to regulation as to 
the price which the owner may demand for 
such property or the use of it. 

A MOMENTOUS DECISION. 

The decision in the case of Munn against 
the People of the State of Illinois has been 
aptly described as "one of the most momen- 
tous ever rendered"** by the Supreme 
Court of the United States. It marked an 
epoch in the relations of the government 
to private property and private industry. 
The doctrine of the decision that "Proper- 
ty does become clothed with a public in- 



THE RIGHTS OF PROPERTY 267 

terest when used in a manner to make it 
of public consequence and affect the com- 
munity at large," and thereby becomes sub- 
ject to governmental regulation as to the 
price which the owner may demand for 
such property or the use of it, is of s# 
sweeping a character that, in principle it 
makes practically every industry and busi- 
ness in the country subject to regulation 
at the discretion or whim of the legislature. 
For, as stated by Justice Field in his dis- 
senting opinion, "there is no business or 
enterprise involving expenditure to any ex- 
tent which is not of public consequence, 
and which does not affect the community 
at large. There is no indutsry or employ- 
ment, no trade or manufacture and no avo- 
cation which does not in a greater or less 
extent affect the community at large, and 
in which the public has not an interest in the 
sense used by the court."* 

The full significance of what Justice 
Field speaks of in his dissenting opinion 
in a related case as "the novel doctrine an- 
nounced in Munn v. Illinois, that the legis- 
lature has a right to regulate the compen- 
sation for the use of all property, and for 
services in connection with it, the use of 



*Mnnn v. Illinois, supra. 



268 OPERATIVE OWNERSHIP 

which affects the community at large," pro- 
mulgated in the last above mentioned case 
for the first time did not appear until it 
was realized that the doctrine applied to 
the railway industry. At the same term of 
the Supreme Court at which the decision 
in Munn v. Illinois was rendered, there 
were also decided some six railway cases 
arising in the states of Illinois, Iowa, Wis- 
consin and Minnesota and which together 
with the Munn case are collectively known 
as the Granger Cases, in which the ques- 
tion as to the right of state legislatures to 
fix maximum rates for railway services 
was raised. The court, applying the doc- 
trine above mentioned of the case of Munn 
v. Illinois, held in each case that the legis- 
lature had such right. 

RUINOUS RAILWAY REGULATION. 

Since the beginning of railway rate reg- 
ulation the regulative activities of govern- 
ment, state and national, in regard to that 
industry, have increased greatly, extend- 
ing to matters of equipment, and manage- 
ment, which greatly increase the cost of 
operation and maintenance, as well as to a 
stricter regulation of rates and fares which 



THE RIGHTS OF PROPERTY 269 

greatly reduce the receipts relatively to 
these items of cost and maintenance. 

The consequences of this grinding of the 
railways between the upper and the nether 
millstones of the downward regulation of 
rates on the one hand, and the upward reg- 
ulation of operative methods on the other, 
has been the depreciation of railway securi- 
ties, involving a loss of hundreds of mil- 
lions of dollars to the holders, and the im- 
pairment of railway credit, so that it has 
been impossible in many cases to obtain 
new capital for extensions, betterments 
and needed equipment. 

TRUE BASIS OF GOVERNMENTAL RIGHT OF 
REGULATION. 

I am not to be understood as objecting 
to the imposition of proper restraints upon 
railways or any other industry or estab- 
lishment engaged in rendering any service 
or producing any commodity that is vital 
to the physical, industrial or commercial 
life of the community, against any abuse of 
the privileges enjoyed by such industry 
or establishment at the sufferance of the 
community. 

The supreme privilege enjoyed by all in- 
dustries is the right to use the discoveries 
and inventions which constitute the arts of 



270 OPERATIVE OWNERSHIP 

civilization, and which enter into every 
modern industrial process. These arts and 
inventions are the heritage and the posses- 
sion of society at large. Nor is this herit- 
age the vague and indefinite thing that is 
often understood when people speak of our 
"heritage of civilization." It is a real and 
substantial proprietary right deducible 
from moral principles which have found 
recognition in modern times in the laws of 
nearly all civilized nations, in relation to 
inventions. These principles are the right 
of a discoverer or inventor of any new art 
or process of manufacture to the exclusive 
use of his discovery or invention, and the 
succession of society at large to all the 
rights of the original discoverers and in- 
ventors, either by abandonment, as where 
the secret of such discovery or invention is, 
actually or presumptively, made public by 
the inventor; or by contract, as where a 
patent is granted to the inventor guarantee- 
ing him the exclusive right to make, use, or 
sell his invention for a limited time, in con- 
sideration of his making public such secret 
so that the public may exercise the rights so 
guaranteed to the inventor, after the ex- 
piration of the patent. 

The State, as the owner, in trust for all 
members of society, of the right to use such 



THE RIGHTS OF PROPERTY 271 

arts and inventions, possesses the inalien- 
able right to regulate any industry in which 
they are used for private gain, to the end 
that no person may be deprived of the right 
to enjoy the fruits of civilization at the low- 
est cost consistent with a just reward to the 
capital, and a fair remuneration to the la- 
bor employed in their production. 

This, then, and not an imaginary grant 
by the property owner to the public of an 
interest in the use of his property, when he 
employs it in certain lines of business 
"which affects the community at large," is 
the true basis of the rights of the State in 
regard to the regulation of private indus- 
try. Regulation on this basis should ap- 
ply to all industries and all establishments 
alike, when, and only when, they undertake 
to lay an exorbitant toll upon the public 
for the fruits of civilization, or otherwise 
violate that golden rule of private proper- 
ty: "Enjoy your own property in such man- 
ner as not to injure that of another." When 
the occasion arises the fearless and im- 
partial enforcement of this rule is as much 
the duty of the State as is the enforcement 
of the rule: "Thou shall not steal." 

But while it is true that no one should be 
denied the right to enjoy the fruits of civili- 
zation on the most favorable terms con- 



272 OPERATIVE OWNERSHIP 

sistent with a just reward to the capital and 
labor employed in their production, it is 
equally true that no person nor group, not 
even the general public, have any moral 
right to demand any commodity or service 
in the production or rendering of which 
capital and labor are employed, except upon 
terms which admit of a fair return for the 
use of such capital, and a just remunera- 
tion for such labor. 

The hostile attitude of government to- 
wards industry in general, and in particu- 
lar towards industries in which large ag- 
gregations of capital are employed, mani- 
fested, as we have seen, through unequal 
taxation, and excessive regulation by gov- 
ernment, operates not only to deprive the 
property owner of his property by impair- 
ing its value, but operates also to the detri- 
ment of the laboring classes and the com- 
munity at large by retarding or preventing 
the natural growth of business, thereby 
lessening the demand for labor which would 
result from such growth, and preventing 
the increase in the general prosperity of 
the community which depends in large 
measure upon employment of labor. 

In a speech delivered by former Presi- 
dent Taft at the Indiana University in 



THE RIGHTS OF PROPERTY 273 

Bloomington, IncL, in January, 1915, he 
said: 

"The hostility of legislatures and Con- 
gress, consciously or unconsciously, has 
come to be directed against all successful 
investments of capital, without descrimina- 
tion. Nothing is so timid as capital, and 
nothing is so easily able to take care of 
what it has. The inquisitorial and nagging 
character of the powers of commissions, 
created for the close supervision of cor- 
porate activities, have so frightened capi- 
tal as to shrink investments and stop the 
normal expansion in the business of the 
country." 

RETROSPECTIVE. 

Thus we have seen that although the 
framers of the Constitution incorporated 
into that instrument all necessary safe- 
guards and guaranties for the preservation 
of the rights of property and person of the 
individual citizen, against the possible en- 
croachments of the government upon those 
rights which they foresaw, the courts, 
though devoid of any legitimate legislative 
power, have, by the process known as judi- 
cial legislation, enlarged the powers granted 
to congress by the Constitution for the 
regulation of commerce, and created a 



274 OPERATIVE OWNERSHIP 

new prerogative of state sovereignty to 
which they have given the name of 
the Police Power, within the scope of 
which the Constitution is inoperative. This 
power, extending in the beginning only 
to matters affecting the health, safety and 
morals of the community, was early ex- 
tended in its scope, to embrace all mat- 
ters affecting the public convenience or 
the general welfare; and its scope is con- 
tinually in process of expansion by the 
courts, so that the rights of the individual 
are steadily being contracted. The obvious 
result of this progressive contraction of in- 
dividual rights, and expansion of the power 
of the State is that we are approaching the 
Socialistic ideal in which the limits to the 
powers of the State will disappear, and the 
circle of individual rights which the State 
is bound to respect, will narrow down to a 
cipher. 

1 We have also seen that in the exercise of 
the police power legislatures are controlled 
in the enactment of laws, and courts in the 
construction of them, to a great extent by 
what they believe to be the "preponderant 
public opinion" on the matters to which such 
laws relate, without regard to the question 
whether or not such laws conform to the 
constitution, the moral law or the rights 



THE RIGHTS OF PROPERTY 275 

of the minority. And we have still further 
seen that on at least two historical oc- 
casions when certain "reforms" or changes 
in the law, involving the destruction or tak- 
ing away of certain essential attributes of 
private property, contrary to the express 
provisions of the Constitution, were de- 
manded by "preponderant public opinion," 
such changes were made by legislatures and 
approved by the courts. 

From these facts the conclusion is ir- 
resistible that when public sentiment shall 
have sufficiently developed along the line of 
the growing tendency of the times to de- 
mand a greater and ever greater measure 
of governmental control over private prop- 
erty and private industry, the things that 
have happened to the railways and the other 
regulated industries will be the fate of all 
industries. 

The sentiment is already strongly in favor 
of applying to manufacturing and mercan- 
tile industries the principle of government 
regulation in regard to prices, not merely 
to prevent extortion, which is the only 
valid ground upon which regulation of 
prices can be justified, but to reduce to a 



276 OPERATIVE OWNERSHIP 

minimum or utterly abolish the profits of 
accumulated wealth, as advocated by one 
section of the community; or to reduce the 
cost of industrial products to the consumer, 
as urged by another and more numerous 
class, without regard to the rights of the 
capital and labor employed in their produc- 
tion to just remuneration. 

THE CAUSE OF, AND THE REMEDY FOR, EXISTING 
CONDITIONS. 

We have seen that the attitude of govern- 
ment towards large accumulations of wealth 
in general, and towards wealth employed in 
industrial production in particular, is what 
it is because it reflects the hostility of pre- 
dominant public opinion towards the owners 
of such wealth. This hostility in turn has its 
origin in the feeling with which the laboring 
classes and their sympathizers, who consti- 
tute a large, well organized and politically 
powerful section of the population, regard 
the capitalist class. For they see in the 
rapidly accumulating wealth of the latter 
class, representing as they believe, unearned 
and therefore unjustly appropriated profits 
of the products of the laborers' toil, the 
cause of the misery and wretchedness which 
is the lot of the average wage-earner under 
the system of wage-capitalism. 

It is but natural, therefore, that the labor- 



THE RIGHTS OF PROPERTY 277 

ing classes should use their great voting 
power to place in the legislatures and the 
courts persons whose views and feelings 
conform to their own. It is natural, also, 
that legislators and judges who owe their 
election or appointment to the suffrages or 
the favor of the laboring classes should 
shape their official conduct, so far as their 
consciences might permit, with a view of 
retaining the favor of that class. And it 
is also a noticable as well as a regrettable . 
fact that in the shaping of their official acts 
where the favor of persons or classes who 
control or possess a large voting power is 
concerned, the consciences of legislators 
and judges often manifest a remarkable de- 
gree of flexibility. 

The remedy for these conditions is social 
justice, and it lies in the power of capitalists 
themselves to adopt it. If they fail to do this 
in the near future there is danger that it, or 
a more drastic remedy may be forced upon 
them at the hands of government dominated 
to a greater extent than they have yet seen 
by hostile public opinion. The day is at 
hand when the fundamental rights which 
underlie the mutual relations between cap- 
ital and labor must be re-defined, and those 
relations readjusted. If the increasing con- 
trol of government over private industry, 



278 OPERATIVE OWNERSHIP 

with its inevitable trend toward Socialism, 
is to be checked, such readjustment must 
embody the principles of industrial democ- 
racy and an equitable division between 
capital and labor of the produce of 
their joint industrial operations based 
upon the value of what they respec- 
tively contribute to such operations. 

Under an industrial system embodyirfg 
these principles the capitalist and the labor- 
er would be partners in a real sense. Their 
interest would be identical, and legislatures 
and courts desirous of advancing the inter- 
ests of the laboring classes as well as their 
own would do so most effectually when their 
acts would have the effect of restoring and 
conserving the rights of private property 
and private industry. When labor, with its 
voting power, ceases to be hostile to capital, 
and becomes instead its partner and ally, 
then, and not before, the agencies of gov- 
ernment will cease to be hostile, and instead 
will recognize and protect the rights of pri- 
vate property and private industry, and en- 
croachments thereon, whether in the form 
of unjust taxation or undue governmental 
control and regulation, will cease. 



CHAPTER VIII. 
CONCLUSION. 

ADVANTAGES SUMMARIZED. 

The advantages which, as we have seen 
in the foregoing chapters, would be likely 
to flow from the system of Operative 
Ownership, when fully established, may be 
summarized under two heads, namely: the 
transformation of the wage-earning classes 
from a condition which is often, and not 
altogether inaptly, designated as wage 
slavery, to one of industrial independence; 
and the re-establishment and preservation 
of the institution of private property in the 
position which it held through nearly the 
first century of the American Republic. 

Such a transformation would involve the 
elimination of Socialism as an important 
social factor; for the establishment of 
Operative Ownership would bring about all 
!that is practicable and desirable in the as- 
pirations of Socialism, regarded from the 
view point of the interests of the laboring 

279 



280 OPERATIVE OWNERSHIP 

classes, of society at large, and in particu- 
lar of that portion of society which is at- 
tached to the institution of private proper- 
ty, and desirous of seeing the social, politi- 
cal and religious aspects of the present 
order preserved and perpetuated. 

The Socialist workingman — the kind of 
people who form the great bulk of the 
Socialist party, would have no further use 
for Socialism, if he, together with his co- 
workers, were given the opportuinty to be- 
come the owners, collectively, of the estab- 
lishments in which they work, with all the 
attributes of ownership, including freedom 
from control or mastery, save by them- 
selves, through foremen or managers of 
their own choosing, and with the certainty 
that all the wealth which they created 
should be their own. 

However alluring, in comparison with his 
condition under the capitalistic regime, the 
prospect might seem of working for the 
Socialist State, with certainty of employ- 
ment, plenty to eat, drink and wear, and 
all the rest that Socialism promises; the 
actual possession, as his very own, of the 
means of producing all these things, or the 
wealth with which to provide them, would 
appeal with incomparably greater force to 



CONCLUSION 281 

the Socialist workingman, than all the 
promises of Socialist propagandists. 

Those Socialists, therefore, by whom the 
abolition of capitalism, with all the evils 
that flow therefrom, and the emancipation 
of the laboring classes from the condition 
to which they habitually refer as "wage- 
slavery," are so eagerly desired, and who 
look with confident expectation to the day 
when the laborer shall receive the whole 
produce of his labor, will not, I believe, be 
slow to see the advantages of Operative 
Ownership as a means of attaining that 
end, and will devote their energies to aid 
in the establishment of that system as a 
means through which their expectations 
above mentioned may really be attained. 

We have seen in an earlier chapter that 
one-half of all the families of the United 
States are entirely propertyless, and it is a 
matter of common knowledge that the poor- 
er families are generally the larger. In the 
case of a large percentage of the families 
that possess property, the extent of their 
possessions is the dwelling house in which 
they live, which is owned by the head of the 
family. In the case also of many w r ell-to-do 
families the property is owned by the head 
of the family. From these facts, which in 
the main, are matters of common observa- 



282 OPERATIVE OWNERSHIP 

tion, though not susceptible of statistical 
verification, it may safely be estimated that 
not to exceed one-third of the voting popu- 
lation of the United States are property- 
owners. The other two-thirds are not 
therefore directly affected by any abuse of 
the taxing power, or by interference in or 
regulation of private industry; nor can 
they be directly affected to their disadvant- 
age by the extension of governmental act- 
ivities in any manner whatever. On the 
contrary they are, speaking generally, the 
beneficiaries, in various ways, of such act- 
ivities, many of which are undertaken chief- 
ly for their benefit, and carried out by legis- 
lative and administrative bodies in a spirit 
©f extravagance and prodigality for which 
the design to benefit the laboring class is 
given as a justification. 

PATERNALISM CARRIED TO EXCESS. 

The extent to which this spirit of patern- 
alism is carried, and the extravagance to 
which it has led within the past fifteen or 
twenty years is reflected in the increasing 
cost of government, year after year, dur- 
ing the period mentioned. This will be 
readily seen by any one who will take the 
trouble to examine his receipt of fifteen or 
twenty years ago for the taxes on any given 



CONCLUSION 283 

piece of real estate, and compare it witk 
his latest receipt for the taxes on the same 
property. It will be found in most cases, 
that, making due allowance for changes m 
the condition of the property, the taxes 
have increased between one hundred and 
two hundred per cent, or more. This means 
that from twice to three times as much of 
the rents, issues and profits of private prop- 
erty are appropriated now in the form of 
taxes, by state and municipal governmental 
agencies, as was appropriated for the same 
purposes fifteen or twenty years ago. At 
the same ratio of increase a very substan- 
tial part of the income of property will, 
after a few years more, be taken each year 
for the support of the government. That 
will be equivalent to taking a substantial 
part of the value of the property; for the 
measure of the market value of property, 
is, ordinarily, the net income which it will 
yield. Thus the policy of paternalism which 
finds expression in the increasing number 
and expense of public institutions, is yearly 
reflected in the diminishing values, from an 
income producing point of view, of all tax- 
able property. 

And this condition is likely to grow 
worse, as the propertyless voter becomes 
more conscious of his power and more 



284 OPERATIVE OWNERSHIP 

thoroughly imbued with socialistic notions 
in regard to the extension of governmental 
activities to the providing of all manner 
of comforts and conveniences at public ex- 
pense. 

For the greater the influence of property- 
less voters, the more complaisant will be the 
government functionaries who have to do 
with the levying and disbursement of the 
taxes, in regard to providing such conve- 
niences and benefits in numberless variety. 
Hence it is that the non-tax-payer may be 
seen going cheerfully to the polls to vote a 
tax or a bond issue, to be paid by his tax- 
paying neighbor, for the erection of some 
public building — here a town hall to cost a 
half a million or a million dollars, and there, 
perhaps a school-house, with a gymnasium, 
swimming pool, bath-rooms, fraternity and 
sorority rooms, dance-hall, machinery hall, 
workshop and many other moderately use- 
ful, highly ornamental, but for practical 
educational purposes, quite unnecessary, 
appurtenances, at a cost of a quarter or 
half a million dollars to the tax-payers, 
when in each case a building of perhaps one- 
half or one-third of the cost would have suf- 
ficed for all practical needs, and would have 
been the limit of expenditure had the de- 



CONCLUSION 285 

cision of the question been left to those who 
would have to pay the cost. 

PROPERTYLESS CLASS BENEFICIARIES OF PUB- 
LIC EXTRAVAGANCE. 

If asked to give his reason for voting so 
heavy a burden of taxation upon his neigh- 
bor, the benefits of which he himself expect- 
ed to enjoy without paying for, the non- 
taxpaying voter would probably answer 
that it would make work for the laboring 
maji; and in the case of the school house, 
the further answer would be that the poor 
man's child is entitled to the best that is 
going as well as the child of the rich man, 
so long as the public, (which means the tax- 
paying minority) is able to pay for it. Thus 
year after ^year the activities of govern- 
ment are directed to providing comforts 
and luxuries, in ever creasing measure and 
variety, for the enjoyment of the many at 
the expense of the few. 

Under a regime of Operative Ownership, 
whether partial or complete, with the gen- 
eral diffusion of wealth which the owner- 
ship in whole or in part by the workers col- 
lectively, of the establishments in which 
they work, would involve, every industrial 
worker would be a property owner and a 
tax-payer; the non-tax-paying voters would 



286 OPERATIVE OWNERSHIP 

be a small minority of the total number of 
voters, and the tax-paying voter, then as 
now, would be slow to vote a needless or ex- 
cessive tax which he must help to pay. 
Thus the extravagance and prodigality of 
legislative and administrative bodies would 
find a speedy and effectual check at the 
hands of the tax-paying voters, now be- 
come strongly predominant, and the burden 
of taxation would be reduced to the actual 
necessities of the public business, and dis- 
tributed among a vastly increased portion 
of the population, and would thereby be 
less oppressive to those who should have to 
bear it. 

THE WEALTHY CLASS THE PREY OF 
DEMAGOGUES. 

With the more general diffusion of wealth 
involved in the system of Operative Owner- 
ship would come, as we have seen in an 
earlier chapter, a more general recognition 
of the sancity of the rights of property, 
which quality would be recognized as ap- 
pertaining not only to the factory of the 
operative-owned industrial establishment, 
and to the land and live-stock of the farm- 
er, but also to the bonds and securities of 
the millionaire — a class of persons now re- 
garded as legitimate prey by every dema- 



CONCLUSION 287 

gogue who, in his eagerness to pander to 
the antipathy and hatred entertained by a 
certain section of the working classes to- 
wards the rich, is ready to despoil them of 
their riches, by confiscatory methods of 
taxation, in the hope of gaining the favor 
of that section of the working classes above 
referred to. Thus will the general adop- 
tion of Operative Ownership result in end- 
ing the abuses of the taxing power, and 
bring security against such abuses alike to 
the workman and the millionaire. 

It is not, however, through the power of 
taxation that the most serious danger 
threatens the rights of private property 
and private industry, but through govern- 
mental regulation, which may be expected 
to be extended, in increasing measure, to 
all industries, if present tendencies in that 
regard are not checked. We have seen the 
disastrous results which have followed the 
excessive regulation of the railway indus- 
try by state and national governmental 
agencies, conformably to a hostile public 
sentiment; and the like result must be ex- 
pected to follow in any other industry when 
it is subjected to governmental regulation 
to the extent that the power to earn a rea- 
sonable return on the capital invested, after 
paying a fair wage to labor, not alone in 



288 OPERATIVE OWNERSHIP 

years of average prosperity, but in years 
that fall below the average in that regard, 
is thereby taken from the owners. 

"Our social system," says Mr. Justice 
Moody of the United States Supreme 
Court, "rests largely upon the sanctity of 
private property; and that state or commu- 
nity which seeks to invade it will soon dis- 
cover the error in the disaster which fol- 
lows. The slight gain to the consumer 
which he would obtain from a reduction of 
the rates charged by public service cor- 
porations is as nothing compared with his 
share in the ruin which would be brought 
by denying to property its just reward, 
thus unsettling values and destroying con- 
fidence." 

It is through such regulation also that 
manufacturing enterprises have been sub- 
jected to the treatment which former Presi- 
dent Taft had in mind when he spoke in 
January, 1915, as already quoted, of the 
hostility manifested by state legislatures 
towards large and successful establish- 
ments, and of the inquisitorial and nagging 
character of the powers of commissions 
having supervision of corporate activities, 
which have so frightened capital as to 
shrink investments and stop the normal 
expansion of business in the country. 



CONCLUSION 289 

UNDUE INTERFERENCE IMPOSSIBLE UNDER 
OPERATIVE OWNERSHIP. 

Such interference of the government in 
private industry could not happen under a 
regime of Operative Ownership. It hap- 
pens now only because legislators and mem- 
bers of congress reflect the hostility to big 
business which prevails among the laboring 
and agricultural classes, which are possess- 
ed of great voting power, whereas the vot- 
ing power of the capitalist class is insigni- 
ficant. If, instead of being owned by a com- 
paratively few capitalists the manufactur- 
ing industries of the country were owned 
by the millions of operatives who work in 
them ; or even if there existed a co-partner- 
ship arrangement between the capitalist 
owners and the operatives, such as has been 
proposed in an earlier chapter of this book, 
as the first stage of the proposed process of 
transition from wage-capitalism to com- 
plete Operative Ownership, there would be 
such an association of capital and voting 
power as would secure for manufacturing 
industries the same immunity from gov- 
ernmental interference as the farming in- 
dustry now enjoys. 



290 OPERATIVE OWNERSHIP 

LACK OF VOTING POWER THE REAL CRIME OF 
BIG BUSINESS. 

It is the lack of voting power which leaves 
capital employed in industries other than 
agricultural and horticultural at the mercy 
of the demagogues who seem to constitute 
a majority of the legislative bodies of the 
country, and who are ready to advance their 
private interests and ambitions by sacrific- 
ing the rights of property of the capitalist 
class, in pandering to the prejudices of the 
populace, which prejudices they also help 
to create. The real crime of "Big Busi- 
ness" is its lack of voting power. 

Under the operation of the Sherman 
Anti-Trust Law and amendments thereto, 
combinations of capital, which by some pos- 
sibility may be used to raise the prices of 
commodities (whether justly or unjustly 
the law does not seem to regard as mate- 
rial) are forbidden under severe penalties. 
Similar provisions have been incorporated 
in the laws of many of the states. Many of 
these laws contain provisions which ex- 
pressly exempt from their operation com- 
binations of farmers for the avowed pur- 
pose of raising the prices of farm products, 
and combinations of laborers for the pur- 
pose of raising wages. Thus while the 
farmers or planters may combine to raise 



CONCLUSION 291 

the price of cotton, and the factory oper- 
atives may combine to raise the wages of 
labor, the textile manufacturers into whose 
product the factors of cotton and labor 
enter, may not combine to raise the price of 
their products without incurring the heavy 
penalties of the law. So, too, farmers may 
freely combine to fix the price of wheat; 
and the milling company's employees may 
combine to fix the rate of their wages for 
making the wheat into flour; but if the mill- 
ing companies combine to fix the price of 
flour they are liable to prosecution for vio- 
lation of the anti-trust laws. 

EQUALITY OF RIGHTS CONTINGENT UPON 
VOTING POWER. 

The lesson afforded by this condition of 
affairs is so simple and plain that it scarce- 
ly needs to be pointed out. If capitalists 
would secure to themselves that equality of 
rights which the constitution guarantees, 
but which the law denies, they must asso- 
ciate themselves with voting power. This 
they may do by allying themselves with la- 
bor in such a way that the laborer will have 
a direct and substantial interest in the cap- 
ital, or in the use of the capital, and in the 
product of the joint operations of capital 
and labor — such an alliance as would em- 



292 OPERATIVE OWNERSHIP 

body the principles of joint operation or 
joint ownership as explained in an earlier 
chapter of this book. 

With the millions of wage earners at 
present employed in the various industries 
of the United States transformed into own- 
ers of the factories, railways and mines in 
which they work; or even into partners of 
the owners, in the manner before describ- 
ed, there would be no more interference 
with those industries by governmental 
agencies than there is now with the indus- 
try of farming; or than there was in all 
industries during the first century of the 
Republic, before society became saturated 
with socialistic notions in regard to the 
insignificance of individual rights and the 
omnipotence of the state. 

WEALTH SECURE UNDER OPERATIVE OWNER- 
SHIP. 

Thus, under a regime of Operative 
Ownership would private industry be secure 
from unreasonable government interfer- 
ence. The laboring classes, no longer the 
propertyless beneficiaries of the spoliation 
of the propertied classes, but transformed 
into property-owners and tax-payers, would 
guard their newly acquired rights so jeal- 
ously that the institution of private proper- 



CONCLUSION 293 

ty in every form would find in them its 
most staunch supporters. Legislatures and 
courts, which now regard the rights of 
property so lightly, as compared with the 
sovereign prerogatives of taxation and the 
police power, would find it necessary to re- 
vise their views in that regard, and to shape 
their actions to conform to the altered 
status of the institution of private property 
in the popular regard ; and the agitator and 
the demagogue, who now find wealth and 
perferment in exciting the hostility of the 
propertyless majority against the proper- 
tied minority, and in particular against 
"big business," would find their occupations 
gone. 

CONCLUSION. 

If the facts stated and the conclusions 
drawn therefrom in the foregoing pages 
are correct — and I believe they can not be 
successfully disputed — it behooves the capi- 
talist class, if they are as wise and far-see- 
ing as they are reputed — and I believe justly 
— to be, without waiting either for legisla- 
tion to compel them to do so, if they wish 
to remain in business, or for the further 
development of Socialistic tendencies in 
legislation, to inaugurate a movement for 
the general and voluntary adoption of a 



294 OPERATIVE OWNERSHIP 

system of joint operation and joint owner- 
ship of industrial establishments somewhat 
along the lines suggested in the foregoing 
chapters. Not only would a true concep- 
tion of social justice, but their own inter- 
ests, and the interests of the propertied 
classes in general, prompt them to that 
course. 

For the Socialistic spirit which, as its ad- 
vocates hope, will ultimately abolish all 
private property in productive wealth, is 
finding expression in increasing measure 
with each succeeding year in legislation 
bringing private industry more and more 
under the control of government, and mak- 
ing capital less profitable and less secure. 

The weakness of capital in its relations 
to government lies, as we have seen, in its 
lack of voting power. In this regard labor 
is strong and is capable of supplying to 
capital, by a union of interests, that 
strength which the latter lacks, and which 
it sorely needs. 

Time was when capital was able to con- 
trol, in large measure, the voting power of 
labor. That time is past. The sceptre of 
political power has passed from the hands of 
capital, and will never be restored except 
by such a union of its interests with those 



CONCLUSION 295 

of labor that an injury to either will be an 
injury to both. 

By according justice and fair play to la- 
bor, capital will be enabled to demand and 
to enforce justice and fair play at the hands 
of government. 

It is the part of wisdom for capital to be 
content with smaller profits, yielding to la- 
bor a larger share of their joint products, 
and thereby insuring its moral and political 
support, rather than have those profits cut 
down through government regulation. 

It is better to give labor a voice in the 
management of industry than to have the 
management, in large measure, taken over 
by the State in the form of government 
regulation. In other words, it is wiser for 
capital to share with labor the management 
and the profits of industry than to have the 
government control the one and cut down 
the other. 

If capital will not take the hand of labor 
extended in a spirit of friendly and interest- 
ed co-operation, it will at no distant day be 
made to feel the hand of government ex- 
tended in a spirit of unfriendly regulation. 

In the due consideration and application 
of these maxims lies the means for capital 



296 OPERATIVE OWNERSHIP 

to forestall the disaster with which it is 
threatened through the socialistic spirit 
which prevades and influences in increasing 
measure nearly all classes of society, and 
which disaster can only be forestalled and 
averted by a closer alliance with labor on a 
basis of identity of interests, mutual jus- 
tice, mutual friendship and mutual loyalty. 



INDEX 

A Living Wage, 26. 

Adams, Brooks, 253. 

Bank Deposits, guaranty of, by government, 155, 156, 157. 

Belloc, Hilaire, 110. 

Big Business, lack of voting power the real crime of, 2S0. 

Board, Joint Operative, need of, 179; how constituted, 179; 
powers of, 179. 

Bonds, power to issue, 144. 

Brooks, Professor John Graham, 54. 

Capital, only use of, contributed to industrial operations, 
170. 

Capital, wages of, 76. 

Capital and Labor, mutual needs of, 97; strife between, 99. 

Capitalism, 10, 11, 12, 19; benevolent, examples of, 133; 
faults of, 19, 20; transition from, to Operative Owner- 
ship, 118. 

Capitalist Theory, fundamental error of, 94. 

Charter of Labor, Leclaire's, 72. 

Civilization, arts of, 270. 

Class Struggle, the, 11. 

Classes, the war of the, 93. 

Classes, working, extreme poverty of, 30. 

Collectivism, extraordinary growth of, 60; the same ex- 
plained, 61. 

Commerce, regulation of, by Congress, 230. 

Commission, Interstate Commerce, 28. 

Commons, Professor John R., 43. 

Constitutional Limitations, 139. 

Cooley, Justice, 139. 

Co-Operation, 46, 66; slow progress of, 77; what it lacks, 79. 

Co-Operation, productive, 66, 93. 

Copartnership in Industry, 187. 

Credit, government, 165. 

Courts, not concerned with public opinion, 261. 

Davies, Emil, 59. 

Declaration of Independence, 50, 65. 

Division, Equitable, what would be, between capital and 

labor, 167. 
Drift and Mastery, 192. 
Economic Conditions, influence of, in production of crime, 

212. 

297 



298 INDEX 

Efficiency, labor, great increase in, under Operative Owner- 
ship, 195. 

Elevators, storage of grain in, subject to State regulation, 
264. 

Eliot, Charles W., 84, 85, 87. 

Ely, Richard T., 18. 

Eminent Domain, 116, 135-139. 

Employment, uncertainty of, 34, 206. 

Familistere Society of Guise, 73, 102, 133. 

Federal Commission on Industrial Relations, 7, 30. 

Field, Justice, 265. 

Ford, Henry, 211. 

Ford Motor Company, 211. 

Fourier, M., 74. 

Gaskell, P., on condition of the working classes in England, 
105. 

Godin, Jean-Baptiste Andre, 73. 

Gompers, Samuel, description of a living wage by, 25. 

Government Aid, 114; examples of, in the United States, 
146, 151. 

Hegel, on source of individual rights, 49. 

How the Other Half Lives, 30. 

Hunter, Robert, 30. 

Incentives to Efficiency, 196. 

Income Taxes, 230. 

Indemnity Fund, 144, 145; in scheme of Operative Owner- 
ship, 157, 158; government made secure by, 157. 

Individual, The, paramount in social relations, 49; ten- 
dency to increasing restrictions of rights of, 259. 

Individualistic Theory of Society, 49. 

Individualism, 49. 

Industrial Production, 22. 

Industrial Relations, Commission on, 7, 30. 

Industries, government-operated, in Europe, 59. 

Industry, government regulation of, 238, 239. 

Infant Mortality, 33. 

Ingersoll, Justice, 236; on the nature of taxes, 227. 

Inheritance Taxes, 232. 

Ireland Yesterday and Today, 149. 

Irish Land Purchase Acts, 146. 

Interstate Commerce Commission, 247. 

Judicial Construction, enlargement of government powers 

by, 241. 
Judicial Discretion, an uncertain form of tenure, 255. 

King John, granting of Magna Charta by, 223. 
King William III, 251. 

Labor Not a Commodity, 94; copartnership, 67, 68, 102, 197. 
Laboring Classes, destiny of, 86; struggles of, 36. 



INDEX 299 

Land Capitalism and Industrial Capitalism, 150. 

Land Grants, 152. 

Land Purchase Acts, Ireland before and after the passage 
of, 148. 

Leclaire, Edme Jean, 70, 188. 

Lippman, Walter, 192. 

Living, American Standard of, 24. 

London, Jack, 200, 201. 

Madison (James), on the commerce clause of the constitu- 

! tion, 240. 

Magna Charta, granting of, by King John, 223; the con- 
stitution as our, 222, 224. 

Manager, General, appointment of, 179. 

Managerial Ability, ownership not necessary to, 121. 

Manly, Basil M., 33. 

Marshall, Chief Justice, on the taxing power, 226; opinion 
of, in the Dartmouth College case, 252. 

Master and Servant, relation of, 12. 

Mill, John Stuart, 71, 109, 189. 

Mitchell, John, 23. 

Montesquieu, on the nature of taxation, 227. 

Munn v. Illinois, 264, 265, 266, 267. 

Nasmyth, James, 187. 

Nearing, Professor Scott, 29. 

Operation, joint, distinguished from profit-sharing, 123. 

Operatives, as sole owners, 182; as joint owners with non- 
working capitalists, 181; double incentive of joint 
owners to become sole owners, 182. 

Operatives' Associations, corporate powers of, 175. 

Operative Ownership, 91; meaning of the term, 91; benefits 
of, in general, 186; to the capitalist, 186, 194; to the 
operatives, 194, 200; to the state, 210; to society, 
213; advantages of, summarized, 279; proposed 
scheme for establishment of, 129; introducing the 
system, 175; obstacles to its adoption, 110; conserva- 
tive tendency of, 218. 

Organized Labor, 23. 

Ownership, Public, part of Socialistic program, 51. 

Parliament, British, passage of Irish Land Purchase Act 
by, 146. 

Participation, by labor in management and profits of in- 
dustry exemplified, 103. 

Paternalism, 282. 

Police Power, The, defined, 248, 249; declared to be an 
attribute of sovereignty, 248 ; a creature of the courts, 
250; unknown to the constitution, 250; scope of, 
constantly expanding through court decisions, 258; 
permits taking of property without compensation, 
250; how it operates, 261; conflicting decisions in 
relation to, 254; menace of, 249. 



300 INDEX 

Poverty, 30. 

Pre-Capitalist Industries, 104. 

Principles of Political Economy, The, 189. 

Principles of Sociology, 196. 

Progressive Taxation, 234; as an instrument of confisca- 
tion, 235. 

Profit-Sharing, 67, 68; as an incentive to efficiency, 197, 
198; as a form of anti-strike insurance, 68, 124; as 
a weapon against organized labor, 124. 

Property, meaning of the term, 220; the rights of, 221; 
sacred in scheme of Operative Ownership, 129. 

Propertyless Classes, influence of, in increasing taxes, 284; 
beneficiaries of public extravagance, 284. 

Public Opinion, the courts influenced by, 258; an unsafe 
criterion of human rights, 260. 

Public Utilities, socialization of, 63. 

Railway Construction, rapid development of, 19. 

Railway regulation, disastrous results of, 191. 

Railway securities, depreciation of, through excessive regu- 
lation, 269. 

Railway Statistics of the United States. 191. 

Regulation of Industry, growing sentiment for further, 275. 

Riis, Jacob, 30. 

Roosevelt, Theodore, 109; would use government aid to 
enable tool-users to become tool-owners, 111. 

Ryan, Doctor John A., 25, 110. 

Scientific Management, 202, 203; opposition of organized 
labor to, 203; objections to, cannot be urged under 
Operative Ownership, 204. 

Sherman Anti-Trust Act, 242; serious fault of, 244. 

Skemp, J. C, on profit-sharing, 125. 

Slavery, human, in England, 15; in the United States, 130. 

Small, Professor Albion W., 26. 

Smith, Adam, 94, 228. 

Socialism, 46, 47, 48; present aim of, 52; growth of, 61; 
not declining, 62; a real menace, 64; elimination of, 
279. 

Socialism and Individualism, 49. 

Socialistic Theory of Society, 49. 

Socialist Platform, 53. 

Spargo, John, on confiscation by taxation, 236. 

Spencer, Herbert, 13. 

State, the, paramount in human relations, 49. 

Steam Engine, 13. 

Strikes, cost of, 39. 

Sullivan, J. W., on profit-sharing and labor copartnership, 
127. 

Sutherland, Hugh, on results of Irish Land Purchase Acts, 
148, 149. 



INDEX 301 

Taft, President, on disastrous effects of over-regulation, 272. 

Tariff, Protective, 151. 

Taxation, 226; progressive, 234. 

Taxes, 226, 227; great increase in, 282; burden of, equalized 
and distributed under Operative Ownership, 285. 

Taylor, Frederick Winslow, 203. 

Taylor, Sedley, 198, 199, 202. 

The Battles of Labor, 39. 

The Collectivist State in the Making, 59. 

The Manufacturing People of England, 17. 

The Principles of Political Economy, 71. 

The Principles of Scientific Management, 204. 

The Social Unrest, 54. 

The Theory of Social Revolutions, 253. 

The War of the Classes, 52, 200. 

The Wealth of Nations, 228. 

Thompson, Slason, 191. 

Tools, necessity of, to labor, 100; ownership of, by tool- 
users, 133. 

Trade Agreements, 82; in England, 84; the goal of trade- 
unionism, 85. 

Trade Unionism, 46, 47, 80; achievements of, 80; the true 
goal of, 85, 90. 

Traditions, venerable, violated by the Sherman Act, 245. 

Trinity Church Case, 253. 

Unemployment, 21; the problem solved, 208; evil of, elim- 
inated under Operative Ownership, 206. 

Unemployment Question, the, absence of, among farmers, 
207. 

Union Pacific Railway, 154. 

United Mine-Workers, 55. 

Views of Society Changing, 131. 

Voting Power, equality of rights contingent on, 291; lack 
of, the real crime of big business, 291. 

Wages, 22-25. 

Wage-Capitalism, 11, 12, 16, 129, 131; in America, 17; 
exorbitant toll of, 42. 

Wages, scantiness of, 20. 

Walsh, Frank P., 30, 32. 

Wealth, Diffusion of, 216; secure under Operative Owner- 
ship, 285. 

Weeks, John W., 58. 

William III, King, charter from, to Trinity Church, 251. 

Workers' Ownership of Tools, principle of, adapted to mod- 
ern conditions, 107. 

Wright, Carroll D., 38. 



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